Rising litigation expenses and larger jury awards are putting significant financial pressure on the casualty reinsurance sector, forcing some companies to bolster their reserves and cope with tighter margins, according to a recent report by AM Best.
The report, titled Casualty Reinsurance Capacity Remains Plentiful Amid Concerns, reveals that while reinsurers have maintained sufficient capacity during the January 2025 renewal season, the casualty segment may face a crisis of availability unless immediate action is taken.
“Social inflation remains a key driver of casualty loss trends from previous years, creating continued uncertainty in the sector due to negative social sentiment,” said Dan Hofmeister, associate director at AM Best.
Social inflation, driven by factors such as increased litigation, higher jury awards, and broader policy interpretations, has forced reinsurers to reevaluate their pricing models and adjust their reserves.
In response to these pressures, many global reinsurers increased their reserves in 2024 to address adverse developments.
AM Best’s analysis of publicly traded reinsurers over the past two decades revealed that companies with higher exposure to property risks experienced lower stock price gains compared to those with greater casualty allocations, according to senior financial analyst Guilherme Simoes.
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