US casualty reinsurers pushing for double-digit rate hikes: Fitch

Reinsurers will be pushing for double-digit rate increases in the run-up to January’s US casualty renewals, according to Fitch Ratings. Rates jumped by up to 15% for loss-affected portfolios at mid-year renewals and increased by up to 10% for other accounts, it added.

“Reinsurers do not believe this year’s US casualty prices have been sufficient,” Fitch said, as it warned cedants to expect “tough negotiations” ahead of January.

In response to concern that rates are too low to cover rising claims costs in the US, reinsurers have pruned their exposure and limited capacity in lines of business most affected by adverse loss development, Fitch said.

“In addition to further increases in January 2025, we expect cover limits and quota-share commissions to be reduced,” Fitch said.

Munich Re and Swiss Re have already reduced their exposure to US casualty risks, while other reinsurers will require more detailed information from cedants as they tighten their risk selection.

At the same time, Fitch said demand is increasing, which is widening the supply and demand gap and adding to the upward pressure on pricing.

US casualty loss costs are expected to continue to climb in 2025, driven by social inflation and litigation, Fitch said. It warned more frequent jury verdicts that exceed payouts of $10m and litigation funding will add to the trend for rising costs, while US tort reform “does not seem to be a public policy in the near term”.

“Latent liability risks from opioids, microplastics and synthetic chemical substances known as PFAS pose considerable challenges and uncertainty for casualty reinsurers,” Fitch added.

It further warned that social inflation risks spreading from the US to common law countries, including the UK, Canada and Australia. It explained that countries governed by civil law, such as France and Germany, are less at risk, largely due to the involvement of judges and caps on damages.