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Inflation, cat losses prompt reserve concerns: Report

Posted On: Jun. 26, 2023 12:20 PM CST


Higher inflation and catastrophe losses are raising concerns about insurer reserve adequacy and could extend or exacerbate current hard market conditions in non-life insurance, Swiss Re Ltd. said in a report issued Monday.

The recent pandemic, the war in Ukraine and inflation shocks are pushing claims higher and prompting questions about reserve adequacy, and in response insurers have increased the share of incurred-but-not-reported claims, Swiss Re said.

Uncertainty over future claims suggests reserves are at risk of being insufficient despite the solid buffer currently in place, the report said.

Releases in large advanced markets eased slightly from 2020 through 2022, driven by motor and general liability in the U.S. and United Kingdom, the report said.

“Despite current high reserve buffers, the pressures from recent systemic shocks and elevated inflation create more uncertainty, and we believe there is a higher probability that adequacy may weaken,” Swiss Re said in the report.

This risk, and uncertainty over legacy business, could limit insurers’ capacity available for new business and “require more premium to cover,” according to the report.