The benign period for liability insurance results may have run its course. Current trends in loss frequency, tort filings, and reserve releases suggest that an inflection point may have been reached, according to a new study by Conning.
“The U.S. liability insurance front has been relatively quiet in recent years,” said Jerry Theodorou, analyst at Conning. “Decreasing loss frequency and an ample reserve position have supported satisfactory results even in the face of falling premium rates in the past decade’s soft market. Our analysis indicates, however, that the benign period for liability insurance results may be coming to an end. If current trends continue, the tort environment is expected to worsen for the defense bar, with adverse loss frequency and severity trends likely emerging for insurers.”
The Conning study, “Liability and Tort Trends: Trouble Around the Corner?” explores the complex dynamics shaping outcomes for liability insurers to shed light on the future direction of liability insurance outcomes. The study also examines the liability insurance market in detail at the level of individual insurers and individual product segments to understand strategic success factors over the long term.
“We analyzed the results of the largest insurers of other liability over the past decade to look for long term success factors across varied business environments,” said Stephan Christiansen, director of research at Conning. “While there was a wide performance gap, companies with the most favorable results were found to be either specialists in the line or have a strong focus on smaller ‘Main Street’ business, with an agency distribution strategy. The focus on smaller business removes the insurer from some of the larger exposures that can give rise to multi-million-dollar claims — an important distinction in the face of potentially deteriorating market conditions.”
Conning is a provider of asset management, risk and capital management, and insurance industry research services to insurers.