![](https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/47476/mctoday_2020_logo4.8c2728b7893f.png?)
INTERVIEW: LAURE FORGERON, SWISS RE
Casualty environment remains highly uncertain and faces many challenges
![](https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/47476/shutterstock_333013640_svetlana_lukienko.e9096d0e69b7.jpeg?)
Improvements are needed to ensure sustainable performance of casualty lines in an environment impacted by economic and social inflation, and increased uncertainty, says Laure Forgeron of Swiss Re.
While casualty is faced with challenges it also means an opportunity as the relevance of re/insurance increases. Casualty faces high uncertainty driven by the long-term nature of the line combined with changes in the economic, legal and geopolitical environment as well as societal behaviour.
“The increase of inflation and accelerating social inflation over the last years have created a real challenge for casualty re/insurers.” This is the view of Laure Forgeron, chief underwriting officer casualty at Swiss Re, as she discussed casualty market trends and prospects in Europe, the Middle East and Africa (EMEA) and the US, with Monte Carlo Today.
“We also see liability risk emerging such as climate change and public nuisance creating additional unpredictability to casualty lines.”
This also translates into an opportunity for the industry as the volatility makes the value proposition of insurers and reinsurers highly relevant. “I believe now is an opportunity for the industry to shape the market so it becomes sustainable for all participants, learning from the experiences of the past,” Forgeron says.
Casualty environment is becoming more complex
The key drivers for the casualty market are macroeconomic trends such as economic inflation, which is pushing up medical costs and affecting wages, as well as the legal and social environment contributing to social inflation.
“Those trends cascade down and impact reinsurance,” Forgeron says.
For non-proportional reinsurance structures, inflationary pressure and the latency are exacerbated. “For proportional reinsurance, there is more symmetry between insurance and reinsurance, but one thing that plays a key role is the commission level. What we have seen is that supply/demand dynamic on the reinsurance side has kept the commission at a high level.”
WATCH THE FULL INTERVIEW HERE
![](https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/47476/laureforgeron.87c81667f19d.png?)
“Now is an opportunity for the industry to shape the market so it becomes sustainable.”
Laure Forgeron, Swiss Re
Social inflation is here to stay
Commenting on social inflation, Forgeron says it is not new, but it has accelerated significantly since 2012, shaping the US liability insurance market for the last few years.
“It impacts the amount, the latency, and the duration of claims. We have seen significant increases in large verdicts in the past years.
“The proportion of large verdicts—above $5 million—has increased by 68 percent since 2014,” she says.
“There was a slowdown in court hearings during COVID-19 as courts closed in the US. When they reopened and began to work through their backlog, the proportion of large verdicts escalated again, demonstrating that social inflation is here to stay.”
Liability lines, commercial auto, and financial lines, particularly umbrella-type cover, are most impacted by social inflation, she says.
Social inflation has predominantly been a US phenomenon, with European insurers exposed to it through their US-exposed partners. But Forgeron has seen an increase in the trend in Europe with changes in the social, legal, and political environment.
“Such changes create a more favourable environment for social inflation. For example, the EU Collective Redress Directive and its implementation might have a bearing on social inflation in Europe, although we don’t know yet.”
Changes in social sentiment are another factor that could contribute to the increase of social inflation in Europe.
“We have seen significant increases in large verdicts in the past years.”
Low corporate trust
“If we analyse the key drivers of social inflation, learning from what we have observed in the US, the first driver is social, or anti-corporate sentiment,” says Forgeron.
Swiss Re’s “Social Inflation Behavioural Survey” found that corporate trust seems to be very low. “An interesting number came up: 79 percent of respondents either agree or strongly agree that large corporations will choose profits over public safety. There is also a tendency to blame corporations for accidents, even if they didn’t directly cause them. This is about social sentiment,” she says.
“The second contributing factor is the jury system. There is a new generation of jurors with different social sensibilities and emotional responses compared to their older counterparts. This new generation are strongly influenced by social media,” she adds.
A third driver of social inflation is litigation funding. “We have seen the litigation funding industry growing tremendously in the past year, and by roughly 12 percent per year since 2019.”
Added to this the plaintiff bar, the community of lawyers who specialise in representing plaintiffs, is playing a role in this inflationary trend as it is becoming more and more coordinated, Forgeron says.
A final driver is the expansion of liability theories, which refer to the legal frameworks or arguments that plaintiffs’ attorneys use to win cases or secure larger settlements.
“These theories can evolve with changing social attitudes and norms, helping to drive up social inflation,” she concludes.
Laure Forgeron is chief underwriting officer casualty, at Swiss Re
Images, from top: Shutterstock / Svetlana Lukienko