By 2040, social inflation and other trends will help push up liability premiums to $583 billion, accounting for 13% of the global property and casualty market, Swiss Re has predicted.
According to the reinsurer, premiums will soar 150% as liability exposures grow. While economic development remains the strongest long-term driver, the growth of liability risk has continued to outpace it, the analysis finds.
“Historically, liability claims have displayed a strong cyclical nature, but notably, on average, they have also grown faster than GDP,” the analysis notes. This claims inflation in excess of the inflation driven by economic growth effects is referred to as ‘social inflation’,” it states.
“We expect that social inflation will be an important driving force for liability exposures over the next 20 years and will lead to premium volume expansion in excess of the rate of economic growth.”
In the longer term, the report adds, emerging risk factors such as new technologies and environmental liability will contribute to additional liability exposure growth. These “have the potential to broaden the scope of liability exposures”, it states.
Claims arising from artificial intelligence system mistakes and climate change litigation, which has already gained momentum, are two areas of increasing risk.
“To date, social inflation has had most impact on large corporate risks in the umbrella and excess liability space, commercial auto, medical malpractice and directors & officers liability. For exposure growth to yield premium growth, the exposures must remain insurable. Insurers must continually adapt to the evolving social, technological, and environmental context,” the report concludes.
liability, premiums, claims, risk, Swiss Re, reinsurance, insurance, North America