Survey Finds European Insurers Increasingly Concerned By Growing Tort Claims

According to the findings of a survey commissioned by The Insurance Leadership Institute of GE Insurance Solutions, independently conducted by Tillinghast, European insurers are becoming increasingly concerned by the growth of tort claims litigation.

The results of the survey were released at the annual Insurance Rendezvous, currently being held in Monte Carlo.

Commenting on the report, “Facing the Future: Challenges for European P&C Insurers,” Ron Pressman, Chairman, President and CEO of GE Insurance Solutions, stated: “It’s interesting that the top emerging claims issues appear to be tort and litigiousness since they haven’t been leading issues in Europe.”

The survey found that 58 percent of respondents were concerned by escalating tort costs and 55 percent by “increased litigiousness.” These headed the list of insurers’ concerns along with a finding that “83 percent of respondents agreed that the general increase in litigiousness in Europe would lead to substantially higher liability claims.”

Pressman noted: “In the past, these issues have been seen primarily as U.S.-centric issues. These findings have confirmed anecdotal observations of a seeming increase in court awards in the UK.”

The European Executive Survey 2004 was conducted between March and July 2004. A total of 79 insurers responded — mainly small- to medium-sized insurers operating in the United Kingdom, Germany, France, Italy, Spain and Scandinavia.

The survey also revealed that reinsurers are as concerned about security and solvency as primary carriers. “Respondents to the survey also agreed that the industry’s financial strength is a major concern. In addition, 87 percent of these insurers believed that the importance of insurers’ own financial strength ratings would increase dramatically,” said the bulletin. All of those responding agreed, however, that consolidation in the industry improved security.

The survey also noted these additional findings as “other issues for insurers and the market:
Reinsurer Qualities
— 100 percent indicated that financial security and top-level ratings highly influence their reinsurance-buying decisions
— 93 percent felt that competitive rates are an important consideration when choosing a reinsurer
— 89 percent said that the ability to maintain long-term business relationships leads the list of qualities they seek in a reinsurer

Solvency II [Guidelines for new Internatioan Accounting Rules]
— 95 percent indicated that effective and competent risk management is an important way to reduce the solvency capital requirements
— 84 percent said Solvency II would lead to increased transparency in an insurer’s financial strength/weakness
— 71 percent agreed that Solvency II is an effective measure to prevent insolvencies
— 68 percent felt that Solvency II puts small insurers at a disadvantage because some lack the resources to develop sophisticated individual risk models

Cycle Management
— 85 percent felt well prepared for the next market cycle
— 69 percent agreed that insurance cycles last about five years
— 58 percent said the current hard market will last at least two more years
— 32 percent cited ‘managing the cycle’ as one of the top strategic issues their company will face over the next five years.