TransRe urges shift to claims-made policies as US casualty losses mount

By Mia MacGregor

July 18 - (The Insurer) - The U.S. casualty insurance market is facing continued deterioration in results, driven by a rise in nuclear verdicts and underscoring the need for fundamental change, according to a new report from reinsurer TransRe.

TransRe’s U.S. Casualty Market 2025 Update said that, despite corrective actions on pricing and policy limits, underperformance has persisted from 2015 to 2019, raising concerns about the adequacy of market responses.

The report noted that while the market has acknowledged its challenges, recent projections continue to weaken, suggesting that pricing has not kept pace with rising loss trends.

Nuclear verdicts, large jury awards that often impact small businesses and consumers, have become increasingly common, drawing in offshore litigation funding.

TransRe observed that efforts to curb claims costs through state reforms are underway, but any benefits will take time to materialize.

“​​We see genuine effort to stem the losses with limit caps and rate increases, but our annual rate change tracker has dropped into single digits for this year so far, despite all the loss inflation factors (bad faith accusations, skilled attorneys, juror sentiment) still firmly in place,” the report said.

The reinsurer suggested that shifting from traditional losses-occurring to claims-made policies could help mitigate risks and allow insurers to respond more quickly to changing market conditions.

The recent launch of a facility by Chubb, Zurich and National Indemnity, which offers up to $100 million in claims-made excess casualty coverage, was cited as a step in this direction.

While the transition to claims-made forms presents complexities, TransRe said the shift could help limit losses to a single policy year and improve the industry’s long-term performance.

“Beyond implementing significant rate increases and resetting limit utilisation, it is difficult to see what else the market might do on a losses-occurring basis,” the report noted, adding that strong risk selection remains essential.

Although the move to claims-made coverage may not be seamless, TransRe concluded that the change would better position the market for future challenges.

“In the meantime, as we continue to count the true cost of earlier sins, we believe underwriter differentiation is key to future success,” the report concluded.