Swiss Re’s Roder highlights challenges and opportunities in casualty lines

One of the key takeaways from the recent Rendez-Vous de Septembre in Monte Carlo was the ongoing caution among reinsurers around casualty lines amid a complex risk landscape.

In an interview with The Insurer TV ahead of this week’s Baden-Baden meeting, Swiss Re’s head of casualty treaty underwriting for EMEA, Patrick Roder, said there were multiple reasons why casualty remains challenging.

“While economic inflation may be slowing, for casualty, the picture is more complex. Wage inflation, healthcare costs and services inflation are still elevated, which impacts the cost structure in casualty lines,” he explained.

“So we are not yet seeing benefits of decelerating inflation on the casualty side that we are seeing with property.”

A further challenge highlighted by Roder is the impact of falling interest rates, which is reducing the discounting benefits insurers rely on in long-tail business.

These factors further complicate a class of business which is already facing the high-profile challenge of social inflation in the US, where an increasingly litigious environment has spurred continued growth in claims payouts.

“The US commercial casualty market had losses of $143bn in 2023 – 33 percent more than global insured natural catastrophe losses last year,” he said.

Natural perils are providing a further challenge for lines such as motor hull insurance, driven by a significant rise in what have traditionally been considered “secondary perils”, such as hail and floods, across many countries in Europe and the Middle East.

While some markets have already reacted to those events, Roder said further actions will be necessary, both on the primary and reinsurance side.

Structured solutions

Amid these challenges, Roder highlighted how structured reinsurance solutions can help clients smooth out volatility and support growth plans.

“In a highly uncertain environment, capital management and volatility management considerations play an important role,” he said.

“Structured solutions can be a great answer, and we have a very seasoned structured solutions team. Within that, casualty is a very sharp arrow within the quiver of structured solutions, and we have actually a strong track record in casualty transactions.

“Beyond structured solutions, we see an increasing demand for reinsurance in such a volatile and uncertain environment.”

Partnership with clients

As renewal discussions progress, Roder stressed the importance of strong partnership between reinsurers and cedants. Transparency and data sharing are critical to ensuring the sustainability of the casualty market, he said.

“We have a lot of insights to share, and we also rely on our clients to provide their data and insights,” he said. “We need to align our interests and make sure that we’re both fully transparent about the risks we’re covering.”

He said this collaborative approach is crucial, particularly given emerging risks such as PFAS, AI exposure and climate change litigation.

Looking ahead to the upcoming renewal season, Roder was optimistic about the role that Swiss Re can play in supporting its clients.

“We’re committed to helping our clients navigate this uncertain environment by providing tailored solutions and sharing insights that make a real difference,” he concluded.

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