Aon highlights $5bn reinsurance premium opportunity from emerging casualty risks

In its latest casualty sector update, developed in collaboration with Moody’s, Aon revealed that emerging risks, such as PFAS contamination, addictive software design, and microplastics, could contribute approximately $5 billion of reinsurance premium annually while also reshaping the liability landscape, presenting insurers and reinsurers with challenges and volatility but also profound opportunities for growth and innovation.

“The substantial rise in plaintiff-side litigation, particularly in the U.S., has created an environment for significantly increased claims values, where previously improbable lawsuits have become economically viable and frequent,” Aon explained.

According to the report, six out of the 13 largest losses in the U.S. P&C industry have been casualty events, with deficient reserving the primary cause of insurer impairment.

Aon also observed that further growth is expected through legacy liability transfers and parametric solutions, whereby proactive insurers can lead in all these areas.

“Re/insurers that strategically leverage data, analytics, and innovative risk-transfer mechanisms will be best positioned to assess such emerging risk and capitalise on the rise in demand for liability coverage,” Aon said.

Recognising these opportunities, Aon and Moody’s have developed named peril reinsurance, a new approach that provides clear, targeted coverage for specific, pre-identified risks.

“Named peril solutions, unlike broad traditional policies, drive transparency and certainty by covering specific emerging pre-litigation threats, such as microplastics or ultra-processed foods,” Aon noted.

Amanda Lyons, global product leader at Aon’s Reinsurance Solutions, commented, “The casualty
catastrophe sector has reached an inflection point, where a structured, scalable market is rapidly emerging.

“We are not just responding to these market changes – we are developing and implementing advanced solutions in order to proactively shape a scalable, structured market that is poised for substantial growth.

“Supported by our insights and technology, we are encouraging reinsurers and other capital providers to allocate capacity to these risks and help drive the development of innovative products.”

Joe Melly, Managing Director, Casualty and Financial Lines at Moody’s, said, “We operate in an industry built on an ability to assess and manage risk.

“Through advanced analytics, AI-enabled casualty catastrophe modeling, and targeted named peril reinsurance products, we are converting emerging casualty exposures into tangible opportunities for re/insurers.

“This work reflects Moody’s deep commitment to fostering a more sustainable, data-driven, and resilient casualty market.”