The trends that will shape the Liability market

What general trends do you see in the liability market?

To some extent, the investment environment is helping to absorb underlying underwriting results of prior years. However, claims costs have risen higher than the inflation. 

 

In the United States, the legal environment remains challenging with the courts struggling to catch up after the disruption caused by the Covid-19 pandemic. Unfortunately, many injury cases remain unresolved, leading to what is known as the "marathon strategy," whereby the longer a case takes to settle, the more expensive it becomes.

 

Can you share a few examples of recent settled losses?

In recent years we have handled difficult and challenging US losses. Even though the settled amounts have been high in general, our US claims team has done tremendous work to resolve these cases in a good manner for our customers. It has become increasingly crucial to have the right expertise and team in place within a specific state when dealing with these losses. To better serve our global customers, we have made significant investments to further strengthen our local claims team in the US. 

 

An example, we recently made a settlement exceeding USD 20 million following a tragic work related injury involving single individual. In addition, we have made several settlements following Auto related losses. In the majority of the cases our insured customer is the owner of the vehicle and they are involved in what is seen as normal traffic accidents with an injured person making the claim. Amongst out Nordic customers we have seen examples of such Auto related settlements between USD 5 million and USD 25 million. 

 

Litigation abuse in the US has been an intensively discussed topic in recent years. What is your view on the development and what other trends do you see in the market?

The insurance industry is currently navigating through a period of ongoing uncertainty across all liability lines, including Auto, General, Products, and Excess. One of the key drivers behind this is the escalating trend of increasing awards in general, coupled with a rise in litigation funding.

 

Nuclear verdicts, which are large and unexpected jury awards, have become a frequent topic of discussion. These verdicts pose a significant challenge for many of our customers when it comes to accurately assessing and factoring them into their US specific risk transfer strategies. While advanced analytics models are being utilized to provide support, predicting the direction of this trend remains challenging.

 

Moreover, we see a clear increase in both the number of losses as well as the severity. In the past, a typical larger loss would not exceed USD 6 to 7 million, whereas we now see settlements at that level eroding full primary limits.

 

According to Marathon Strategies, a PR and research firm, several factors have been identified as to what has contributed to the rise of litigation abuse over the past decade.

It includes corporate mistrust, social pessimism, erosion of tort reform, public desensitization to large numbers, and shifts in the demographics of jury pools. However, some sources have specifically highlighted the impact of advertisements that promise substantial claims from insurance companies. In the past the public did not associate insurance companies with being responsible for everything, but that perception has changed. Between 2017 and 2021, trial lawyers allocated a staggering USD 6.8 billion to advertising. Last year alone, more than USD 1.4 billion, which equates to one-fifth of the total spending, was invested in advertising.

 

Are there any trends you have observed outside of the US?

In 2024, new product liability legislation will take effect in Europe, and we also see an emerging trend of litigation funding in the UK and EU. It is important to closely monitor these trends and their potential impact on the market. Deminor, a litigation funder, predicts that the investment potential for litigation funding will reach nearly USD 3.75b by 2025, doubling the current investment potential.

 

According to the European Class Action Report 2022, the UK continues to be the most active jurisdiction for class action, with increasing volumes in Holland and Spain. and around 22 percent of the class actions relating to Product liability, consumer law or personal injury. 

 

The mismatch of the international development in pricing and reserving strategies as well as what is expected by customers and brokers in the local markets create challenges for renewal negotiations. Market approaches to these vary, with some embracing a softer outlook while others work to increase and maintain the financial resistance of portfolios.

 

 

For more information about how Zurich can help protect your domestic and international business, please contact Rasmus Eigtved, Underwriter Liability.