US casualty the elephant in the room: S&P

Although S&P Global Ratings had many positive things to say about the reinsurance sector at its recent briefing in Monte Carlo, Senior Director Taoufik Gharib urged the market not to forget about the major risk posed by the US casualty space.

“US casualty is the elephant in the room,” Gharib said today at the 66th Rendez-Vous de Septembre (RVS).

S&P confirmed last week that it remains stable on the global reinsurance sector, and Gharib told the audience that when debating internally in terms of the sector outlook and whether to turn positive or not, it ultimately landed on a stable outlook in part because of concerns around US casualty.

“The reason for that (stable outlook) is that US casualty continue to be a key risk for the sector, specifically in, let’s say, general liability, excess casualty, professional indemnity, and commercial auto,” said Gharib.

Over the past 18 months or so numerous re/insurers have bolstered their reserves in light of the uncertainty surrounding prior years’ US casualty business, and while the impact has been better for some than others, the question is whether the risk is contained.

“To look back, we saw many companies back in the early 2000s fail because of inadequate reserving or pricing for the casualty business. We’re not saying that would be the case going forward, but we’re just being cautious,” he said.

“Yes, granted, here on the panel we’ve mentioned so many positive things for the market, such as pricing, capitalisation, etc, but I think we should not forget about US casualty, which will be a major risk for the sector going forward,” he added.

US casualty is expected to be a hot topic at this year’s RVS, and it will be interesting to hear the thoughts of some of the world’s largest reinsurers on the space and what 2025 might hold.

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