Casualty Reinsurance Capacity Holds Steady and Future Risks Persist

Rising litigation costs and increasing jury awards continue to strain the casualty reinsurance sector, leading some reinsurers to strengthen reserves and operate with narrower margins, according to a new AM Best report.

The report, Casualty Reinsurance Capacity Remains Plentiful Amid Concerns, notes that reinsurers provided ample capacity during the January 2025 renewal season. However, without interim measures to address cost pressures, the segment could face an availability crisis. A recent AM Best panel on reinsurance renewals indicated that US reinsurers with casualty reserve portfolios receiving 8–10 percent rate increases are not keeping pace with loss cost trends, while those securing 15–20 percent hikes may fare better.

"Social inflation remains a key driver of casualty loss trends on past years and continues to create uncertainty across the casualty landscape amid negative social sentiment," said Dan Hofmeister, associate director at AM Best.

Mr. Hofmeister pointed to rising claims costs driven by increased litigation, higher jury awards, and broader policy interpretations. These trends have pressured reinsurers to reassess pricing models and reserve adequacy. In 2024, many global reinsurers reinforced reserves to offset adverse development.

A shift in investor sentiment in 2022 led reinsurers to reduce capacity for volatile property markets, redirecting resources into casualty lines, which have been more favorable in equity markets. "We examined publicly traded reinsurers' stock prices over the past 20 years," said Guilherme Simões, senior financial analyst at AM Best. "We found that reinsurers with higher allocations to property lines saw a lower average yearly increase in stock prices compared with those with higher allocations to casualty lines."

The report highlights ongoing adverse reserve development in casualty reinsurance throughout 2024, with no signs of easing. Unlike property lines, which can adjust attachment points or terms to mitigate risk, casualty risks are more complex and continue to deteriorate under social inflation pressures.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.