The reinsurance market is “converging” around a “negative” view of US casualty business, pointing towards an increase in upwards pricing pressure at 1 January, according to Scor.
Global P&C CEO Jean-Paul Conoscente said at the carrier’s annual Rendez-Vous press conference in Monte Carlo that, last year, reinsurers differed in their degree of pessimism about US casualty as a class.
“Last year, [we had] a segregated market, where European reinsurers had a negative view of US casualty, and the US and Bermuda had a more positive view of US casualty,” he said.
“Today, the whole market is converging in a more negative view of US casualty, with loss trends exceeding the price increases and the improvement on the insurance side.”
Conoscente said this would lead to difficult renewal negotiations on US casualty and more extreme pricing corrections on the business than seen so far.
“It's not just a matter of changing the [ceding] commissions by 1 or 2 points to solve it,” he said.
The comments come amid increasing anxiety about the status of the 2015-19 US casualty accident years, for which some reinsurers have re-reserved extensively, and the more recent casualty accident years of 2021-23.
Scor group CEO Thierry Léger said in an interview with this publication last week that reinsurers may have been “too optimistic” about the health of the younger accident years, which had previously been seen as more stable than the pre-Covid-19 years.
Scor predicted that, in 2025, prices would fall slightly on European and North American non-cat property.
In cat business, Scor believes pricing will be stable for European cedants and slightly down for those in North America next year.
Conoscente said Scor’s preference for writing cat business remains with XoL, adding that he expects little appetite among reinsurers for dropping attachment points.
“We remain very disciplined in having a minimum retention above which we deploy our capacity,” he said.
Pricing will also be stable for European casualty cedants next year, Scor said, but, in North America – where it branded pricing “inadequate” – rates will rise.
More broadly, Léger told the press conference the “insurability” of global risks was becoming increasingly challenged by four key trends.
The first of these is climate change and its impact on severe weather patterns.
Other trends making insurability more difficult are increasing socio-political polarisation, causing greater civil unrest; rising digitisation and the increased risk of cyber losses; and the litigious environment in the US, creating casualty losses.
Léger said the industry has become accustomed to $100bn+ in annual insured losses.
“Now we are entering a world where insured losses in the world will be about $150bn,” he said.
When applying an increase rate of 5%-7% per year – as seen in recent years – to this figure, insured losses could hit $300bn within a decade, the executive said.