Casualty
The casualty insurance market, depending on domiciled risk location, has been an extremely volatile class of business in the last 5-7 years with huge losses impacting London capacity and resulting in rate increases.
However, within the international market we have seen rates stabilise in the past 12 months, due to increased capacity and a lack of loss severity which has allowed portfolios to run successfully in comparison to prior years. The rating environment currently sits between flat and +2.5% after risk adjustment, we expect this trend to continue.
As the market continues to soften, we will see the reintroduction of Long-Term Agreements (LTAs) as Insurers seek to future-proof their income. The Lloyd’s Market Association (LMA) is set to release a standardised LTA agreement in the coming months, and we may see markets agreeing to deals lasting up to three years. While LTAs have been available previously, they are likely to become more common.
This provides a real opportunity for clients to capitalise on LTAs and future proof their own rates allowing for financial stability. Given the additional capacity which has entered the market, clients are in an extremely positive position where they can challenge long-standing incumbent programmes which have remained untouched for an extended period.
One area of concern for Insurers are US risks, where loss severity has driven international markets insurers to review their portfolios and potential exposure to nuclear verdicts coming out of this jurisdiction. It is worth noting for clients looking to enter this market that almost all significant losses in this space over the past 12 months have been driven by US exposure – it is a challenging marketplace for clients and insurers alike to operate in.
We expect these large settlement awards to remain and therefore, over the next 12 months, international markets with US exposure on their books will be looking to reduce capacity and secure facultative reinsurance where possible. This can cause delays and challenges in the placing process, so we recommend that full underwriting submissions are provided in ample time to allow us the ability to market to all available insurers and drive competition.
With a focus on US Upstream, Midstream, and Downstream casualty, this is an interesting time within the Marine & Energy market. The Baltimore bridge loss, which occurred in March 2024, initially appeared likely to impact broader rating trends within the Energy market due to capacity committed under the P&I Clubs. Most of the combined Marine and Energy market, where capacity is shared, will be involved with the clubs in some form, and this loss is expected to be approximately USD 1.5–3bn. However, following the 1/1 treaty renewals and the imminently due P&I Club renewals, we have not seen any meaningful upward movement in rating. In fact, the downward trend over the past 12 months has continued. Within the US market we are seeing rates closer to 2.5–7.5%, regardless of attachment.
Reinsurers have raised concerns around US Casualty due to adverse developments in the space beginning in 2023 that continued through 2024, particularly related to the 2014–2019 underwriting years. Confidence in third-party liability lines has declined, despite increases in primary market pricing and reductions in coverage limits since late 2019.
Insurers with significant exposure to the US faced higher than average risk-adjusted price increases for treaty renewals at 1/1/2024. This trend was expected to continue, but with access to surplus capacity, treaty renewals at 1/1/2025 did not adversely impact retentions and rating, even when considering the growing challenges in this space. Auto remains a major concern for insurers, with "nuclear" losses emerging from the US. Any advancements in telematics that buyers can provide as evidence to mitigate auto loss trends will improve the outlook on risk profiles.
Despite these challenges, new entrants into the market, including ADA, Mosaic, Westfield, Everest, and Alchemy, have emerged. This additional capacity applies pressure to incumbent markets. We are seeing pressure from within insurers to continue their growth trajectory and therefore there is fierce competition between both leaders and the following market to win and compete on new business.
Throughout both the international and US marketplace there has been considerable capacity entering the marketplace – therefore now is a good time for clients to challenge their limits purchased and programme structures to take advantage of a softening rating environment.
From both a US and international casualty standpoint, the Energy Transition remains at the forefront of business planning, with insurers keen to support large transition projects. Diversification away from traditional oil and gas will help address some of the challenges referenced above. Rating remains competitive, and while there are no significant renewable losses impacting the market, we expect the rating trend to continue for the foreseeable future.
As the market continues to be more focused on telematics, the more granular the detail clients can provide us on their exposure profile, the greater our ability to negotiate the best terms and conditions throughout the programme.
We are in a unique position, where we are responsible for placing business from traditional oil and gas through to renewables and power. As a result, we have full sight of the marketplace and alternative access points allowing us a strong advantage against competitors, which leaves us in a position where we can leverage different marketplaces in favour of our client base.
General casualty market rate trends
This graph taken from our benchmarking system shows that within the general casualty market there have been increases in rate through 2024, with the market stabilising as the year progressed. Within this report we provide a specific update in regards to the Energy and Power market.
