With circa two decades of experience in casualty insurance, Graeme Ivory (pictured) has a birds-eye view of the broad trends shaping this space today.
In a recent interview with Insurance Business, Ivory, who was named director of international casualty at Markel International in late 2023, emphasised the diversity underpinning the international casualty segment, and how this is reflected in its risk profile. It comprises such an extensive range of coverages, he said, but also such a broad client base both from a scale and a geographic standpoint. “No two risks are ever the same and no two territories that segment operates in are ever the same.”
Touching on what’s happening in the market today, he highlighted how recent casualty headlines have been dominated by the impact of the reserve strengthening that has happened across the US casualty market. Some of the concerns regarding reserve adequacy have been driven by the impact of social and financial inflation being higher than initially expected on severity of loss trends.
“And we’re seeing some of those challenges being compounded by longer-than-expected development patterns,” he said. “The impact of the pandemic is still looming in that respect, with loss reporting lags and settlement backdrops resulting from the court closures that were experienced quite heavily in the US. While the international casualty market hasn’t been immune to all those challenges by any means, their impact has been nowhere near as severe as the impact on the results we’re seeing come out of the US.
“The dynamics of an internationally focused portfolio have so many more variables, mainly due to that geographical spread. We will insure clients across multiple continents where financial and legislative conditions can vary really significantly. For example, even the global impact of what we're seeing economically, with regards to some of the inflation pressures, might be seen in the US and the UK but it doesn’t expand across all areas of the world. It’s a truly dynamic portfolio.”
A successful international casualty play is founded on having a thorough understanding of how your portfolio is made up, he said, and of how different external market conditions will impact each individual piece, as well as the overall portfolio. While the international casualty market has not seen the number and severity of the challenges seen in the US, particularly with regard to social and financial inflation, it has been through a period of remediation since coming out of the softer market conditions of 2014-to-2018.
“As a result of that remediation, the results in more recent years have been very healthy and there has been a lot of profit in those years of accounts,” he said. “So, from our perspective at Markel, we have a really positive outlook. And we [in the London international casualty team] feel we’re starting from a position of strength as we’re not bringing across any legacy challenges or the constant requirement to re-evaluate our reserving assumptions.”
Ivory highlighted that, in line with its ambitions for this market segment, Markel made a host of key hires at its London office in 2024, operating across three distinct product lines – general liability, life sciences products and environmental liability. From his time in the market, he said, he knows first-hand that product innovation and being able to offer a one-stop-shop solution to clients are key value differentiators – and the most important tools in the toolkit of offsetting challenging market conditions.
Ivory noted that the casualty business is long-tail by its very nature. “The greatest challenge to underwriting casualty business is that requirement to make a number of objective assumptions as to what things will look like in the future,” he said. “And that's just the nature of long-tail business generally. But sometimes the impact of a single event, such as the global pandemic, an election, or a conflict, can have a significant unexpected impact on some of the assumptions that would have been made historically.
“The inflationary pressures that we've felt over the last couple of years are a good example of that as they weren't necessarily projected in people's economic outlooks. That element of having to make those assumptions brings its own challenges as it can set what happens apart from your initial expectations. So, having a long-term approach and a focus on stability is particularly relevant for the casualty classes.”
Having a respected casualty brand long-established in the US is a real value-add, Ivory said, as it means clients can rely on an insurer recognising that this is a long-tail class which requires a long-term perspective. Clients and trading partners need to be sure that their insurer partners are equipped to deal with a loss event that may not be known about for many years and that they’ll be there to offer support in the event of that occurring. Translating that is always going to be a challenge for casualty providers.
“From a broader market perspective, geopolitical instability will always present a challenge to the insurance market,” he said. “The casualty element is definitely not immune to that by any means. As a market, we’re currently experiencing a higher level of uncertainty on a global scale, and that results in ever-changing risks and volatility – not just from an insurer’s perspective but also from our end clients.”
Clients and brokers rely on their insurer partners to provide the protection and certainty required to allow them to have business continuity through uncertain times. The question of how this period of geopolitical uncertainty will play out is on the minds of many across the market.
In addition, the world is facing the prospect of a potential global economic recession, with all the resulting impacts this would have on the market itself and clients’ businesses. “[A global recession] creates a number of additional considerations,” he said. “From an underwriting perspective, clients can become more price sensitive, and there's always a risk that cost-cutting can lead to deteriorating risk management.
“A reduction in business’s capital expenditure, for example, can result in a decline in their asset integrity, which naturally creates an increased risk of the failure of their assets. These challenges all come back to the uncertainty regarding where we stand globally, from an economic and geopolitical perspective – which in turn creates its own challenges for the market by introducing an element of the unknown.”
