Despite pressures from social inflation, reserve uncertainty, and increasing competition from insurance-linked securities (ILS) capital, the casualty reinsurance market remains resilient—and, in several areas, is poised for disciplined growth.
That’s according to Bob Forness (pictured), CEO of Bermuda-based MultiStrat, which specializes in casualty and specialty reinsurance and structuring risks for ILS investors. Forness emphasized that while overall pricing momentum has eased from its pandemic-era peak, most casualty lines still maintain adequate rates relative to underlying loss trends.
“Adequate rate trend is only a part of the entire question,” Forness said. “To respond to social inflation, you need a multi-pronged approach: risk selection, contract wording, exclusions, claims oversight, legal panels. Rate is just one element.”
The most persistent headwind remains social inflation, driven by litigation funding, broader liability theories, and rising nuclear verdicts. While primary insurers have been able to secure rate increases in the mid-single digits, reinsurers higher up the tower face amplified volatility.
“Primary layers are somewhat more insulated, but excess casualty writers remain highly exposed to nuclear verdicts,” Forness said. This exposure has driven reinsurers to raise attachment points, tighten wordings, and demand greater transparency into cedents’ claims practices.
In lines such as commercial auto and professional liability, reinsurers continue to post double-digit rate increases, even as other segments, such as workers’ compensation. see modest competition from new capital.
Casualty reserve strengthening has been a defining factor in reinsurance earnings over the past two years. Several insurers bolstered reserves for policy years 2019 through 2021, reflecting uncertainty surrounding claims emergence delayed by pandemic-era disruptions.
Forness believes much of this corrective action has now taken place: “A lot of the reserve strengthening was addressed in 2023 and 2024. Not to say there can’t be more, but people took strong corrective action where they needed to.” Still, he cautioned that the long-tail nature of casualty means reinsurers must remain vigilant, as loss trends often emerge several years after policies are written.
While some industry commentary has suggested a softening market, Forness pushed back on broad generalizations.
“Rates went up 20 to 50 points in some casualty segments over several years; they’re not giving that back overnight,” he said. “What we are seeing is selective competition from new capital where there’s confidence in the structure, but overall, underwriting discipline remains strong.”
Reinsurers are increasingly requiring multi-year collateral commitments, higher retentions, and detailed actuarial reporting from cedents in order to manage tail exposures and preserve profitability.
One of the most significant market developments has been the rise of casualty ILS as a complementary capital source to traditional reinsurance. Unlike property ILS, which has matured over two decades, casualty ILS remains a nascent but rapidly expanding market segment.
MultiStrat is a key participant in structuring casualty portfolios, including general liability, workers’ compensation, and structured reinsurance deals, and transforming them into investable ILS products.
“When we first started, there weren’t many companies that believed casualty could work as an ILS product,” Forness said. “On one level, we’re pleased to see the interest. It endorses the work we’ve done for more than a decade.”
Forness identified three types of new entrants:
He believes the casualty ILS market could grow significantly through 2026 due to investor demand for higher yields and portfolio diversification. However, he cautioned that casualty ILS is far more complex than property ILS due to long-duration liabilities, capital lock-up periods, and actuarial uncertainty. Strong partnerships with fronting carriers, brokers, and cedents are essential to successful execution.
Looking ahead, Forness expects reinsurers to play an increasingly central role in how casualty risk is syndicated globally. Macroeconomic uncertainty and geopolitical risk are driving greater demand for long-term risk transfer mechanisms, while the MGA channel continues to expand its share of casualty distribution.
“There is still adequacy in the market,” Forness said. “There is room for reinsurers to grow, but only if they maintain discipline. Whether you’re traditional or collateralized, you need deep expertise, analytics, and alignment. Without that, you fall into pitfalls.”
