Insights into the casualty reinsurance market in Europe

Howden Re’s Wolfram Schultz on navigating the challenges facing the European casualty reinsurance market.

What are the most pressing issues for the European casualty reinsurance market?

The European casualty market is dealing with several evolving challenges. A major issue right now is around risks related to PFAS, the so-called “forever chemicals”. These chemicals are ubiquitous in manufacturing, and litigation around their potential health effects is ramping up, particularly in the US. We’re seeing predictions of up to $80bn in potential litigation costs just from water contamination and bodily injury claims tied to PFAS. While Europe may not see the same scale of litigation, the risk is significant, and (re)insurers are taking steps to assess and mitigate exposures across their portfolios.

This extends beyond PFAS to other chemicals, such as phthalates, which are equally prevalent and carry similar risks. For (re)insurers, the key issue is not just assessing current exposures but ensuring that underwriting strategies are continually refined to account for emerging risks. The volatility we are witnessing across liability lines is prompting the need for more robust modelling and greater collaboration across the industry to address these challenges.

How are reinsurers adapting to this changing risk landscape?

Reinsurers are moving quickly to adjust their underwriting strategies, particularly by focusing on how they model these evolving risks. At Howden Re, we are working closely with clients to refine their understanding of where exposures lie, using distinguished tools to model the possible outcomes. We are all well aware that casualty modelling is not yet as developed as property catastrophe modelling tools, which were developed throughout the last decades, however the results we are seeing when working with our clients are convincing.

One of the areas where reinsurers have sharpened their focus is on assessing how past portfolios might be exposed to these emerging risks. It’s a process of understanding historical underwriting and how that might affect current and future liabilities. Reinsurers are also adopting more stringent risk management practices, ensuring that they are comfortable with their cedants' strategies moving forward. This is particularly important in an environment where social inflation, especially in the US, is driving up claim costs.

How is Howden Re helping its clients navigate these risks?

At Howden Re, we prioritise a proactive approach to risk management. For us, it’s about partnering with our clients to provide integrated, tailored solutions that fit their specific needs. Whether it’s through comprehensive portfolio assessments, advanced risk modelling and traditional or alternative capital solutions, we aim to provide flexibility and resilience to help clients manage both immediate and long-term exposures. In this fast-changing environment, we are also heavily invested in leveraging new technologies and data analytics to offer more accurate pricing and risk management tools.

Another focus area is educating clients about the importance of understanding not just the known risks like PFAS, but also what’s on the horizon. Risks such as ultra-processed foods, microplastics and AI-integrated products may become significant issues in the future, and we want our clients to be prepared for that. Knowing where these possible risks are in the hype circle is also vital to understand exposures.

How significant is the role of social inflation in shaping the casualty reinsurance market today?

Although not new, social inflation has become a major factor in the casualty reinsurance market, predominantly in the US but with some spillover effects in Europe as well. The costs of claims are increasing, not just because of the risks themselves but due to higher jury awards, more aggressive litigation and evolving societal attitudes towards liability and compensation. For reinsurers, this means higher potential losses and more unpredictable claim costs.

To manage this, we’re seeing more focus on getting accurate and comprehensive data, as well as stress-testing underwriting assumptions. Reinsurers need to understand how these social inflation trends will impact their portfolios, especially for long-tail risks like product liability, motor and medical liability, which can escalate over time.

What other emerging risks do you foresee for the European casualty market in the coming years?

There are a few key areas that reinsurers will watch closely. Autonomous vehicles and the technology behind them might reshape liability lines, particularly in products liability insurance, but this could also broaden to motor insurance depending on the jurisdiction. As autonomous technology becomes more prevalent, questions around responsibility and liability for accidents will become more complex. We expect new insurance products and reinsurance solutions to evolve to manage these risks effectively.

Another area of concern is around regulatory changes, especially in the realm of climate-related disclosures and ESG compliance. As companies face increasing pressure to meet stringent environmental standards, the risk of liability for failing to meet these expectations will grow. (Re)insurers will need to adapt to this shifting landscape, offering solutions that align with both legal requirements and the evolving risk profiles of their clients.

Given these challenges, what do you see as the path forward for the casualty reinsurance market in Europe?

The path forward will require collaboration and innovation. Insurers, reinsurers and brokers must work together to build more resilient portfolios, incorporating advanced risk modelling and capital solutions that allow flexibility. At Howden Re, we’re focused on helping our clients stay ahead of these risks by offering not just traditional reinsurance solutions, but integrated approaches that include capital markets expertise, data analytics and new product development.

It’s also critical that we continue to invest in talent. Having the right people, with expertise across different sectors, will enable us to navigate these complexities and ensure that we’re offering the best possible solutions for our clients. Ultimately, the casualty reinsurance market in Europe will need to remain nimble, proactive, and deeply client-focused to thrive in the face of these challenges.

Wolfram Schultz, head of casualty, continental Europe, Howden Re