The overall outlook of liability insurance claims has been relatively generous but a variety of factors have primed this market for major, rapid changes, said Swiss Re.
The wholesale provider or reinsurance and insurance predicts in a new report that economic growth will accelerate claims severity and demand for insurance, “turning reserve releases into adverse reserve developments.”
Economic factors that have led to lower-than-expected liability claims trends and years of reserve releases are expected to reverse as the economy strengthens, the tort system develops and new risks are presented.
The company specifically calls out several new or emerging risks—cyber, hydro-fracking and autonomous cars. These risks may “become more prominent in claims,” Swiss Re said in a statement.
Additionally, the potential for a catastrophic risk in which one event impacts many companies, countries and lines of business is growing. A crane collapse, Swiss Re used as an example, could trigger general liability, workers compensation, product liability and motor policies. Traditional property claims, especially form wildfires and floods, have also resulted in heavy casualty losses. In fact, many of the largest claims over the last decade are from property events.
“With global ever-increasing interconnectivity—via cyber links and supply chains—the risk of casualty catastrophes is rising,” said Jayne Plunkett, head of casualty at Swiss Re.
Swiss Re said the demand for cyber insurance will increase with the rise in reported data breaches and with the realization that commercial general liability policies do not adequately cover cyber losses. The cyber insurance market in the US was estimated at $1.3 billion in premiums in 2013 and has been the leader in the overall market but European market participants are expect similar US-like developments in regulations and laws, particularly data-breach notification requirements.
Claims involving autonomous cars might add to a trend in the increase in liability claims since liability for an accident is now held by a driver–or possibly a car or part manufacturer. But where does liability stand when the a vehicle is not controlled by a person? There could be shared liability between car-owner and car manufacturer, said Swiss Re.
Chad Hemenway is Managing Editor of Advisen News. He has more than 15 years of journalist experience at a variety of online, daily, and weekly publications. He has covered P&C insurance news since 2007, and he has experience writing about all P&C lines as well as regulation and litigation. Chad won a Jesse H. Neal Award for Best Single Article in 2014 for his coverage of the insurance implications of traumatic brain injuries and Best News Coverage in 2013 for coverage of Superstorm Sandy. Contact Chad at 212.897.4824 or [email protected].
