Casualty under the spotlight

The latest Voice of Insurance episode takes a deep dive into the North American professional liability market, some of the most broad-reaching and dynamic classes of business anywhere in the world.

Casualty is under the spotlight the world over, but nowhere more so than in North America, so the two senior underwriters featured on the latest instalment of the Voice of Insurance podcast are right at the frontline in the battle to keep on top of new perils and trends in the world’s fastest-moving and highest stakes market.

The episodes features two leaders from QBE North America focused on the US professional liability market. Danielle Librizzi is the insurer’s head of professional liability, and her colleague Chris Cooper is QBE North America’s head of media liability. Between the two of them they have a lifetime of market experience, fodder for a lively conversation.

The US admitted market has lost ground in the past four to five years to a large rise in volume of business going into excess and surplus (E&S) lines. Host Mark Geoghegan asked whether this ebb and flow is cyclical.

New technology and cyber risks are “so fast paced and volatile” that such business is likely to remain in the E&S market, Librizzi suggested, with the flexibility to move rates “very important” for underwriters taking on such risks.

“In many ways, the only way carriers can get enough comfort is to do it on an E&S basis,” she said, noting that QBE North America is “roughly 50:50” on underwriting E&S and admitted business.

Other business is more cyclical and may yet return from the E&S market, as the broader market softens, she suggested, such as smaller errors and omissions liability risks and miscellaneous professional liability business, within the media sector, for instance. Just not larger and more sophisticated risks at the sharp end of technological change.

“Anything driven by new, emerging technologies where you’ve got that volatility or fast paced movement, the risk is changing so quickly, that carriers have made the turn and said, ‘We have to be able to move just as quickly in terms of rate and form’,” she said.

The host also asked whether the casualty market has rate adequacy at present, bearing in mind its long tail nature means small pricing errors now can mean much larger effects once claims take shape in several years’ time.

“For QBE’s book, we’re comfortable where we are for the market overall,” Librizzi said. “In some lines, there was a supposed correction over the last couple of years, and now we’re on the downturn for a bunch of those lines – where that downturn ends, I think, is the debate.”

For some professional liability business, rate has fallen enough that it is already on or near the line of adequacy, she suggested, which may lead to capacity being moved from one casualty line or segment to another.

“If it goes too far down, we just have to take a pause and say, ‘We’re feeling like we’re adequate’, and if we can’t keep rate where we need it to be, we’ll have to pivot,” she said. “Luckily, we have a diverse book. Rate isn’t always doing the same thing in all of our sectors, so we can manage that. Overall, the market does this in cycles, we’ve seen this movie before, and we’ll see it again.”

The question arose for Cooper how the pandemic, combined with a trend towards digital platforms, plus the widely reported writers’ strike in Hollywood, have all affected the media liability risk landscape in the past few years. Firstly, movies are going from big screen to streaming services much faster than before, changing industry dynamics.

“The acceleration, the shortening of the theatrical window creates other things to think about when you’re underwriting, in terms of the various partners that are involved in the creation, financing or distribution of the content,” he said.

Smaller productions mean in overall terms perhaps less money being made, he suggested, but also perhaps broadened opportunities through the growth of the many streaming sites.

“There’s more exposure created from partners of the content that’s being disseminated. You have to think about how those different parties might be upset by something not performing well, or by a film that was originally supposed to go to theatrical release that got released directly to a streaming app because of the pandemic. How does that change your exposure in terms of the financial impact upon the third parties associated with the production?” he added.

The writer’s strike affected QBE North America less than some of its rivals, he explained, because the carrier had more of a focus on non-fiction productions – documentaries and reality television. However, non-fiction brings its own legal risks, he noted, rooted in wider journalistic issues of fact-checking and integrity.

“The truth as an ultimate defence to defamation doesn’t necessarily protect us from paying defence costs, but it’s important to underwrite to the integrity of the producers, the integrity of their clearance partners, the integrity of the individuals that they are interviewing,” Cooper added.