Navigating the Turbulent Waters of Casualty Insurance: Insights from Industry Experts

The casualty insurance market is currently experiencing unprecedented volatility, with significant pricing fluctuations and escalating loss costs becoming the norm. To shed light on these challenges and offer guidance on navigating this complex landscape, Risk Strategies’ Mike Vitulli, Zurich North America’s Bill Chepulis, and Zywave’s Jim Blinn and Jeff Cohen recently participated in a webinar titled “Casualty Craziness: What’s the Cause and What’s the Cure.” If you don’t have the opportunity to check out the full webinar, read on for key insights from the discussion and actionable advice for insurers, brokers, and policyholders.

The Current State of the Market

Jeff Cohen, Senior Vice President at Zywave, set the stage by describing the current market as one of “escalating loss costs, escalating causes of loss, and escalating types of loss.” He emphasized that both carriers and policyholders are feeling the pressure, with carriers writing larger checks and policyholders facing non-customer-friendly rate increases.

Bill Chepulis, Head of Large Casualty for Zurich North America, noted that the market in 2025 will likely resemble the challenging conditions of recent years. He highlighted the bifurcated nature of the market, with profitability in workers’ compensation being offset by severe issues in general liability and auto lines. Chepulis pointed to the “broken legal environment” as a major driver of these challenges, stating, “Severity has basically doubled since the beginning of COVID.”

Mike Vitulli, National Casualty Practice Leader at Risk Strategies, described the market as “bananas,” emphasizing the prolonged period of rate increases that clients have endured. He noted that while the workers’ compensation market remains competitive, general liability, auto, and excess lines are increasingly difficult to place. Vitulli stressed the importance of a cohesive program structure, stating, “If you don’t go into it fully understanding that all these risks need to be aligned, you could be facing some tough challenges.”

Jim Blinn, Vice President of Client Solutions at Zywave, provided data-driven insights, showing that the median amount of losses over a million dollars has significantly increased since 2015. He warned that companies may not have priced for such high losses, which could lead to financial strain. And when you take into consideration that Direct Premiums Written (DPW) increased by 2.0% to $7.5 billion in the first half of 2024, according to the NAIC, this potential financial strain is only growing.

While it’s critical insurance carriers, brokers, and policyholders understand the market, it’s just as important they know what to do about it. With so many variables outside of our control, how do we regain the power to thrive under these unprecedented conditions?

Strategies for Navigating the Market

1. Product Fit and Risk Management: Chepulis emphasized the importance of ensuring that insurance products are fit for purpose and that risk managers can articulate their strategies for controlling and mitigating risks. He advised, “You need to know your risks and be able to differentiate your ability to understand and control them.”
2. Claims Handling: Both Chepulis and Vitulli highlighted the critical role of effective claims handling. Chepulis advised against cutting costs in this area, stating, “Now is not the time to go on the cheap. The dollars and pennies you’re saving up front will cost you in the end.”
3. Benchmarking and Data Utilization: Vitulli recommended using benchmarking data to understand industry standards and make informed decisions about coverage limits. He also stressed the importance of offering higher limits to clients to protect against unexpected large claims.
4. Program Structure and Negotiation: Vitulli suggested negotiating across the entire insurance program to mitigate increases in specific lines. He also recommended exploring additional coverages, such as active assailant insurance, to address emerging risks.

Knowledge is Power: Industry Insights and Data

Market data and intelligent analytics are essential for making smarter decisions in a risky market. Blinn shared compelling data from Zywave’s extensive loss database, which includes over 1.1 million loss records. He highlighted that the pricing for excess liability has more than doubled since the onset of COVID-19. For example, a $50 million limit that might have cost $150,000 pre-COVID now costs over $300,000. This significant increase underscores the need for careful risk management and strategic planning.

Blinn also discussed the impact of “judicial hellholes,” regions where legal environments are particularly challenging for insurers. He noted that severity in these areas can be two-and-a-half times higher than in other regions, driven by factors such as premises liability, jury anchoring, and third-party funding. This highlights the importance of understanding geographic and industry-specific risks when structuring insurance programs.

Practical Advice for Stakeholders

1. Understand Your Industry and Geography: Vitulli and Chepulis emphasized the importance of understanding the specific risks associated with different industries and geographic regions. For example, hospitality clients must consider exposures related to liquor liability and security protocols, while transportation clients need to address auto liability and third-party hauling risks.
2. Invest in Technology and Training: Vitulli highlighted the role of technology in managing risks, particularly in the auto sector. However, he cautioned that technology alone is not a panacea. Effective training and risk management practices are essential to mitigate poor driving behaviors and other risks.
3. Communicate and Collaborate: Chepulis stressed the importance of open communication and collaboration between carriers, brokers, and policyholders. He advised having upfront conversations about claims handling strategies and ensuring alignment on risk management practices.
4. Stay Informed and Adapt: The panelists agreed that staying informed about market trends and adapting to changing conditions is crucial. This includes attending industry conferences, leveraging data insights, and continuously evaluating and adjusting insurance programs.

Want to Learn More?

For those interested in a deeper dive into these topics, we encourage you to view the entire webinar recording. Additionally, don’t miss the upcoming Casualty Insights Conference on March 6th in New York City, where industry leaders will discuss the latest trends and strategies in casualty insurance. Register now here.

To further enhance your understanding of loss trends and data, check out Zywave’s Loss Insight solution, which offers a comprehensive database of loss records to help you make better-informed decisions.