Casualty insurers face a “new era” of risk, with complex mass litigation and long-tail threats shaping as significant drivers of loss, according to Aon and Moody’s.

The past decade has brought a “rapid transformation” in the market as large lawsuits become more frequent and economically viable for plaintiffs, particularly in the US, the global broker and ratings agency say in a report.  

Emerging risks including per- and polyfluoroalkyl substances, “addictive software design”, microplastics and environmental liabilities present potential for major losses.  

The report notes six of the 13 largest loss events in the US property and casualty industry have been casualty events.  

“Each emerging risk carries latent long-tail uncertainty reminiscent of asbestos claims, which generated nearly $100 billion in losses. However, today’s emerging risks occur with much greater frequency and broader potential impact.”  

Aon and Moody’s say the changed landscape could inspire innovative solutions including advanced catastrophe modelling through artificial intelligence and named peril reinsurance.  

Early estimates indicate a $US5 billion ($7.62 billion) reinsurance market for the risks identified in the report, with significant growth potential for parametric structures and legacy liability transfers. 

Aon Reinsurance Solutions global product leader Amanda Lyons says insurers must recognise that the casualty catastrophe sector is at “an inflection point, where a structured, scalable market is rapidly emerging”.  

“We are not just responding to these market changes – we are developing and implementing advanced solutions in order to proactively shape a scalable, structured market that is poised for substantial growth,” she said.

“Supported by our insights and technology, we are encouraging reinsurers and other capital providers to allocate capacity to these risks and help drive the development of innovative products.”  

See the full report here.