Although there is a significant market correction taking place in the North American liability insurance market, demand for casualty reinsurance is increasing, said Chirag Shah, executive vice president, Casualty Reinsurance, at Willis Re.

Low interest rates, economic volatility, social inflation and adverse loss development, which threaten both the asset and liability sides of insurers balance sheets, are driving an increase in demand for reinsurance, he said during an interview with Carrier Management, which became a podcast. (The full audio podcast is available below).

“We are certainly seeing an increase in demand for casualty reinsurance, despite some of the hardening conditions that we’re reading about in the reinsurance market,” he said. “This is really being driven by the fact that we are still in a period of heightened uncertainty in terms of how casualty lines will perform over the next few years.”

Insurers are using reinsurance as a tool to manage their capital more efficiently and help them deliver on the financial targets they’ve set with greater certainty with creative reinsurance structures, he said.

“So, what we’re finding is that the demand for reinsurance is increasing, but that’s also being fueled by the fact that reinsurers, despite hardening conditions, are willing to offer clients more solutions to address their evolving needs.”

As reinsurers’ market appetite evolves in this hardening market, Shah recommends that ceding companies engage the reinsurance market early and frequently, particularly on casualty renewals.

During the podcast, Shah also discussed:

  • How insurance rate increases have been seen across all casualty lines, except for workers compensation.
  • How securitization of casualty in the area of insurance-linked securities is still challenging but some solutions have been found.
  • How cyber insurance might become bigger than the D&O market.
  • How COVID-19 could provide a catalyst to develop more tort reform.