Swiss Re Highlights Rising Demand for Reinsurance Amid Volatile Conditions

Swiss Re anticipates increased demand for reinsurance driven by escalating natural catastrophe risks, economic instability, and a growing legal environment in the United States. The company notes that the conversation around forward-looking risk assessment and capital management is becoming increasingly critical as volatility and uncertainty continue to challenge the industry.

Swiss Re's chief executive officer for property and casualty reinsurance, Urs Baertschi, emphasized the industry's recurring challenges, saying, "The key topics for the industry remain largely unchanged from last year, but the challenges have intensified, leading to higher demand."

In 2023, global insured losses from natural catastrophes surpassed $100 billion for the fourth consecutive year. Swiss Re's data shows that 2024 is following a similar trend, with $60 billion in losses already recorded by midyear, 62 percent above the 10-year average.

Demand for specialty lines, including renewable energy and cyber insurance, is growing. The cyber-reinsurance market is expected to expand further as increasing cyber attacks drive the need for more efficient capital allocation strategies.

US Litigation Impact on Liability Claims

Swiss Re's Social Inflation Index highlights a surge in US liability claims, driven by litigation costs. Over the past decade, US liability claims have risen 57 percent, with 2023 marking a peak in social inflation at 7 percent. These trends stem from a growing number of large court verdicts, mass-tort claims, and the role of third-party litigation funding (TPLF).

Gianfranco Lot, Swiss Re's chief underwriting officer for property and casualty reinsurance, said, "Aggressive litigation practices are especially problematic for liability insurance. Over the past 5 years, US liability lines exposed to bodily injury claims recorded cumulative underwriting losses of $43 billion."

The effects of social inflation are also being observed in countries such as the United Kingdom, Australia, and Canada, with potential to spread to the European Union due to legal reforms and broader access to litigation funding.

Swiss Re Institute's publication Litigation Costs Driving Claims Inflation—Indexing Liability Loss Trends is available here.