US casualty market adapts rates to rising awards

The US casualty market is facing higher award levels and players are sifting through their portfolios to adapt prices to the new environment—but there is more room to go, Jason Richards, Swiss Re’s head of casualty underwriting reinsurance, told Monte Carlo Today.

“The levels of awards seem to be getting bigger; juries seem to want to punish large organisations probably even more than they have done in the past,” Richards said.

In August, a US jury found that chemical giant Monsanto knew its Roundup weedkillers were dangerous and awarded a man who claimed herbicides containing glyphosate had caused his cancer $289 million in damages from the company. Bayer said the number of plaintiffs seeking damages over Monsanto’s Roundup and Ranger Pro herbicides has reached 8,700.

While Bayer wants to appeal against the judgment, it creates some uncertainty, Richards said. In addition, commercial auto in the US is seeing a constant level of very high awards coming from certain jurisdictions such as Texas, he noted. “Award levels are getting very high in some cases,” he said.

There is also a trend to higher frequency and severity in the US casualty market due to infrastructure issues, distracted driving or workplace accidents, Richards said.

“In the US you have some challenges and some areas are responding well,” he said. In some cases rate levels are increasing ahead of loss trends and starting to get to a good level, such as in personal auto, he noted.

“Other sectors within the US have still some way to go,” Richards said.

There is a lot of uncertainty around the large loss verdicts and awards that are being given out to companies, especially in the large corporate space but also around commercial auto, Richards said.

“The degree has surprised people and companies are reacting. Where there are losses, rates are going up but there is more room to go,” Richards said.

“Many companies are still working through their portfolios. It takes time for people to respond,” he explained.

“We’ll see rate increases, we’ll see players changing their appetite, maybe pulling out of the market or restricting what they do,” Richards concluded.