Q2 Claims Trends

Macro Economic Impact Is Real

The effects of global economic trends, including inflation, are being felt in the claims arena. Some insurers have messaged the impact on current reserves, but more importantly, all insurers are messaging the expected increase in future claims values which will result from cost of materials, supply chain issues and other challenges.

Costs of Litigation Are Increasing

For clients and insurers alike, the costs of engaging in litigation are increasing significantly, with some law firms adding up to 20% to rates that were already considered high. Coupled with the risk that is inherent in any litigation – a process through which no specific outcome can ever be guaranteed – these costs are rightly encouraging all parties to seek negotiated resolution prior to the onset of litigation.

Representation & Warranty Claims Are Evolving

Representation and Warranty claims continue to evolve in both frequency and severity. This can now be considered a mature risk class, with established best practices for claims. Aon clients have filed over 600 such claims since 2013. Through Q2, Aon noted a significant upward trend in the number of settled claims in this line of business for which payments are based on a multiple. This is now a feature of 31% of Aon's portfolio, versus 24% in the prior year.

Traditional Risks Still Drive Loss Costs

Much is said about the costs associated with some newer and emerging classes of risk, including cyber and intellectual property and in each of these classes of coverage there is notable increase in frequency and / or severity. That said, the loss costs associated with more traditional risks such as fire, explosion, natural catastrophes and contingent business interruption continue to be those of greater overall materiality for the industry.

Geographic Trends

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