Fresh Capacity for the Casualty Market

While much of the E&S market has benefited from an influx of new insurance companies and managing general agents (MGAs), few have seen the tsunami of new entrants that the Casualty market has experienced. Over the past two years, more than 20 well-capitalized new insurers have entered this market.

"In my 30+ year career, I've never seen so many new markets entrants come in within a few months of each other," observed Bill Wilkinson, president, National Casualty Practice at Risk Placement Services (RPS). "These organizations have aggressive growth goals and aren't hobbled by the cost of legacy issues."

As is the case across the industry, these insurance companies and MGAs have lured experienced E&S casualty underwriters — even entire underwriting teams — away from long-standing employers with the promise of new opportunities. This change leads into the second market trend.

Labor Shortage Leads to Submission Bottlenecks

The labor shortage is being felt in the E&S Casualty market.

With underwriters stretched, it's the most complete and thorough submissions that catch their attention and move to the top of their queue. Submission quality is more important than ever and details matter.

Because of this carrier influx, often what would have been a renewal will turn into a coverage shopping opportunity. Those who decide to stay with the same carrier may be dealing with a new, less experienced underwriter.

Coverage Towers

While the insurers and MGAs have brought new capacity to the E&S Casualty market, they've been cautious about limits, often capping them at $2 million. So while there's now often a broader group of insurers to choose from, towers will continue to involve more carriers than they did a few years ago. Competition generally improves above the $10 million mark in most industry segments.

Distrust and Anger Revealed in Nuclear Verdicts

While it has been quieter on the nuclear verdict front over the past two years, don't be lulled into thinking that this quietness represents a trend going forward. Potential nuclear verdicts lurk in the backlog of court cases that still exists. S&P Global Market Intelligence noted that federal civil caseload statistics suggest that the time from file to trial had lengthened and that the percentage of civil litigation pending for more than three years had also increased.*

Social-media driven changes in societal behavior, an increase in class action suits and the normalization of large settlements contribute to the social inflation that results in nuclear verdicts.

Reptile theory — a plaintiff's attorney strategy that ignores liability and negligence while highlighting injuries and damages — is another contributing factor to nuclear verdicts. This approach feeds on jury members' distrust and makes them angry about the defendant's actions as well as fearful that those actions may happen again. Those who see jury duty as an opportunity to enact social change or right social wrongs are especially influenced by this approach.

Learn more about what's next for the Casualty market in the RPS 2022 U.S. Casualty Market Outlook. 

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*Zawacki, Tim, “Social Inflation's Illusory Slide,” S&P Global Market Intelligence, 28 Feb 2022.