History shows that the insurance market is cyclical, and this is especially true for casualty lines of business. Now, in 2020 we are experiencing the impact of COVID-19, which has acted as an accelerant in terms of both the pricing and capacity usage trends previously sought, according to Christopher Ross, Managing Director, Guy Carpenter.
It has further increased uncertainty on the economic, liability and regulatory landscapes. In a time of low interest rates, investment returns will decrease. Close regulatory scrutiny of policy wordings and language is also likely to take place. There are also uncertainties regarding whether immunities will be put in place for businesses as they re-open, to limit future liabilities.
With this level of uncertainty, including lack of a full understanding of how much more development will take place in the most recent adverse development cycle, it is clear the market will continue to harden. We expect pricing to continue to increase. And with limit and attachment point strategies currently in place, further hardening in the overall casualty market will take place.
Guy Carpenter’s capabilities help our clients understand the potential for latent development. Using our MetaRisk® Reserve™ model, we can test the impact of different development patterns, loss trends and strategies on held reserves. Being able to understand the potential scope and scale of development leads directly into go-forward strategies, particularly for capital management.