Inflation dominates renewal talks

Inflation has come to dominate renewals negotiations, even for liability lines demonstrably distant from the runaway inflation readings that have dogged short tail property, David Bell (pictured), chief executive officer of legal malpractice insurer Alps Insurance, told Intelligent Insurer.

Bell calls his business line “the shallow end of the susceptibility pool” and believes high inflation should not severely impact his business. Yet he admits his renewal talks with his reinsurers are dominated by inflation worries.

“There’s no escaping it—there is a chorus of rate demands from reinsurers,” Bell said, adding that most conversations result in the same point.

“The solution always leads to: ‘you have to get rate and you have to protect yourself from the unknown by getting rate’,” he said.

Calculating the impact of inflation is never easy, he admits. Pricing today for medium and longer-tail claims well down the road in unfamiliar inflation territory is a risk class of its own.

Bell compares long tail pricing decisions to Fed monetary policy. Every Fed move seeks an economic impact several quarters down the road, yet each is taken without any knowledge of how more recent policy moves have already changed the playing field.