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A new report from Gallagher Re has observed that reinsurers overall maintained a healthy appetite and stable capacity for US Casualty lines at the July 1 renewals.
Commenting on the US general third party liability segment of the casualty insurance space, Gallagher Re noted that loss trends remain elevated, and as a result, volatility in performance is expected for the foreseeable future.
“That said, the original market remains disciplined, and carriers continue to take corrective actions to their portfolios, particularly from a pricing standpoint,” the firm added.
As a result, reinsurers reportedly overall “maintained a healthy appetite and stable capacity” for US Casualty lines.
Gallagher Re’s report continued, “Given the expectation of volatility going forward, reinsurers are taking a nuanced approach by cedant and continue to put pressure on pricing where they view it warranted. Equally, a number of reinsurers continued to selectively grow in segments such as E&S Casualty and Middle Markets.
“Individual placement outcomes were highly dependent on cedants’ historical performance as well as transparency on strategy and disclosure of data around key battlegrounds such as view of rate adequacy, loss trends, claims trends, etc. Those that provided greater transparency and insight were able to achieve stable pricing and placement outcomes.”
Switching to the US Healthcare Liability, Gallagher Re suggested that pricing trends continued to moderately increase as increased severity continued across all subsegments.
Capacity is said to have remained adequate overall at July 1, with select reinsurers moderately increasing/decreasing appetite.
“Hospital exposures continued to be the most scrutinised subsegment by reinsurers given the larger limit stretches and track record of significant ‘nuclear verdicts’, reinsurers focusing much of their attention to sexual abuse and molestation,” the firm’s report stated.
According to Gallagher Re, while location continues to be a key consideration in evaluating potential severity exposure, the spread of ‘nuclear verdicts’ across most States – even those historically deemed as favourable – is contributing to ongoing pricing pressure.
On US Professional Lines, Gallagher Re remarked that for pro rata structures, there was continued pressure on terms and conditions at July 1.
The firm’s report went on, “Variable/qualified features have been eliminated or reduced for many placements. Ceding commissions were down -0.5% to -1.5%.
“We saw increasing interest in Excess of Loss structures and renewal terms for these placements were much more stable with risk adjusted rate changes in the -5% to +10% range. The pressure on terms is primarily driven by negative underlying rate / missed rate projections across most lines, most dramatically for Public D&O.”
As for US Workers’ Compensation, Gallagher Re said that single claimant exposed layer pricing has seen continued pressure for increases, even on loss-free layers.
Capacity for these layers is reportedly tighter but has been stable due to continued primary rate decreases and anticipated medical inflation impacting historical development and future costs.
“For catastrophe layers, rates online remained largely flat. There was pressure on price due to the prevalence of payroll increases, but wage inflation and abundant capacity have enabled buyers to maintain terms largely as expiring,” Gallagher Re concluded.
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