Markel’s Finsness: Casualty rates will stabilise once newer players “feel the pain too”

Casualty is facing a “stressful time” with rates softening while issues such as social inflation linger, but the market will stabilise once newer players start to feel more pressure, Mia Finsness, managing executive, global casualty underwriting and claims at Markel, has told The Insurer TV.

Finsness noted the casualty market is facing several headwinds, including older claims now coming to a head after being delayed by court closures during the pandemic, newer claims coming through, social inflation “that is rampant and arguably worse than ever”, economic inflation and a softening market.

"We're no longer benefiting from the hard market rate increases we saw for a couple of years, mainly due to new capacity,” she told The Insurer TV. “So I think that it's a little bit of a stressful time in terms of maintaining discipline, and underwriting, and terms and conditions, and continuing to try and get rates against all those other factors.”

The new capacity that has entered the casualty market in recent years has led to a “dampening in rate increases”, the executive noted.

“But I think that the increased loss costs and social inflation will catch up even to the new entrants, and they're going to start to feel the pain too,” Finsness said. “I think when that happens there will be pressure for them to really focus on terms and conditions and to increase their own rates.”

Finsness highlighted that there have not been many entrants in the past year because rates have gone down.

“So I do think things are going to start to stabilise once some of these other newer carriers realise that they can't get away with underpricing and looser terms and conditions,” she said.

A flight to quality emerging

While the newer players, unencumbered by past liabilities, have been able to compete on price and contribute to softening, the more established players have advantages over them, Finsness stated.

She suggested that a flight to quality is starting to be seen. Established carriers such as Markel have been around for a long time, have good ratings and strong track records.

“It’s no secret that our goal is to be here for many more years to come and to be profitable. Whereas I think for some of these start-ups, especially in the MGA space, they maybe are more playing a short-term game where they're trying to get more premium in so that they can then be sold or do something else,” she said.

In contrast to the start-ups, legacy players can tout their long-term commitment and point to investments in areas such as their claims teams.

In her role at Markel, Finsness focuses on both the underwriting and the claims side of the casualty market.

“We have really world-class claims examiners and claims adjusters handling very difficult claims in a very difficult situation with social inflation,” she said. “I think there's a value to that, and there's a premium to that.”

Finsness said that Markel has had recent success in selling policies at a higher premium than some of the newer competitors because clients see the value the claims team is providing, and Finsness noted the casualty market is facing several headwinds, including older claims now coming to a head after being delayed by court closures during the pandemic, newer claims coming through, social inflation “that is rampant and arguably worse than ever”, economic inflation and a softening market.

The new capacity that has entered the casualty market in recent years has led to a “dampening in rate increases”, the executive noted.

Finsness highlighted that there have not been many entrants in the past year because rates have gone down.

“So I do think things are going to start to stabilise once some of these other newer carriers realise that they can't get away with underpricing and looser terms and conditions,” she said.

A flight to quality emerging

While the newer players, unencumbered by past liabilities, have been able to compete on price and contribute to softening, the more established players have advantages over them, Finsness stated.

She suggested that a flight to quality is starting to be seen. Established carriers such as Markel have been around for a long time, have good ratings and strong track records.

In contrast to the start-ups, legacy players can tout their long-term commitment and point to investments in areas such as their claims teams.

In her role at Markel, Finsness focuses on both the underwriting and the claims side of the casualty market.

Rate alone won’t save market from social inflation

Discussing how to tackle social inflation, Finsness said the push to get rate in the past few years has been helpful.

“But we realise that rate alone is not going to be able to save us in a social inflation environment,” she said. “So things that are important are portfolio diversification, tight terms and conditions, limits management, and obviously rate is important too,” she said.

The executive added: “These are all things that I think insurers really need to focus on in order to continue to combat social inflation, in addition to investing in state-of-the-art and world-class claims resources to actually combat it day to day.”

More generally, Finsness suggested the insurance industry can decrease social inflation by doing a better job of bringing transparency around the issue to the general populace.

“The fact of the matter is that the costs of social inflation and the nuclear settlements are going to get passed down to the consumer ultimately,” she said. “I don’t think the average person realises that. And of course the average person is the average juror who is going into the jury box and awarding these large verdicts.”

Watch the full 17-minute interview with Mia Finsness, Markel’s managing executive, global casualty underwriting and claims, to hear her views on the impact of the current economic conditions on casualty, the most stressed areas of the market, and which emerging risks underwriters are keeping their eyes on.

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