While social inflation is certainly not a new subject within the re/insurance sector, the industry needs to continue to evolve to stay ahead, according to David Marra, Group Chief Underwriting Officer (CUO) of RenaissanceRe (RenRe).
Marra discussed inflation during RenRe’s earnings call for its financial results for the third quarter of 2024, which saw the firm post an underwriting income of $394 million, as well as a significant rise in net income to $1.2 billion.
“As we discussed last quarter, we have been tracking general liability trends closely and engaging with the market to better understand and accurately price future loss trend. Inflation and claim severity have been increasing in this line, driven by an aggressive plaintiff’s bar and sympathetic juries,” he explained.
Adding: “While social inflation is not new, we believe that the industry needs to continue to evolve to stay ahead. In the last five years, companies have responded by reducing limits and increasing rates. These remain important levers, but to stay ahead of loss trend, we believe that insurers also need to improve claims handling processes, refine their underwriting approach, and accelerate rate increases.
“To support this, we are actively working with customers to share insights and improve data capture throughout the renewal process. This enables us to deploy our capacity in the right place and charge the right price for each program. While our goal is to continue to partner with all of our customers, we are prepared to reduce on those programs that do not meet our requirements, most notably in our general liability book.”
He went on to note that RenRe believes that its actions to increase rates, improve data, and practice disciplined underwriting will all help to create a more sustainable casualty marketplace, and an attractive portfolio that maintains strong returns.
During the call, RenRe’s Chief Executive Officer (CEO), Kevin J. O’Donnell, also discussed the firm’s casualty and specialty segment.
“Moving now to our casualty and specialty segment. Regarding specialty lines, overall, these continue to remain attractive. We expect an orderly January 1st renewal, and our focus will be on maintaining our book and to seek additional opportunities with existing customers.
“Regarding casualty lines, we are increasingly a top reinsurer on the programs that we participate on. This provides us a broad overview of the state of the market and puts us in a strong position to set the tone for renewals and drive positive change. This is important, as much of casualty is written on a quota share basis, which means we depend on our customers underwriting and rate setting, more than in other lines. We think about the casualty business cycle over a 10 year time scale. We like our current portfolio but believe casualty rates need to accelerate in order for this business to remain attractive over the next 10 years.”
O’Donnell also explained that the firm is engaging with its customers and providing feedback regarding its observations on rate and trend.
“This engagement has been positive, and our customers share a similar assessment of the market requirements. For this reason, we are optimistic that additional rate will be achieved and we can continue to support our customers,” he concluded.
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