The 15 largest publicly-traded property and casualty insurers and reinsurers are all facing similar challenges as the year comes to a close. According to R Street’s review of Q3 2021 earnings calls, the top three difficulties are social inflation, climate change and supply chain disruptions.

Nearly all 15 (re)insurers commented on the impact of those issues on their current and potential future financial results. A few mentioned credit-based insurance scores, infrastructure and potential changes to global tax rates as important topics. While COVID-19 and natural catastrophe losses were also discussed, the overall message was that these losses were manageable and not irreparably denting balance sheets.

Each of these issues has a public policy dimension, so it is critical for legislators, staff and regulators to understand them before any develop into full-blown crises that impact policyholders.

Below is brief summary from the R Street Institute on each issue area discussed in the earnings calls.

Social Inflation

Almost every commercial insurer offered comments on social inflation, whether in prepared remarks or in the Q&A with analysts. All insurers that write commercial liability lines of business—commercial general liability, excess casualty, commercial automobile, medical professional, directors’ & officers’ liability, employment practices liability, products liability and professional liability—are exposed to the deleterious impact of ballooning civil litigation awards.

If social inflation is not checked, insurers’ reserves could be proven inadequate. Under-reserved liability insurance business has historically been the largest cause of insurance company impairment, so insurers are justifiably wary of any external trend with the potential to challenge reserve adequacy.

Most reported securing hefty rate increases in their liability books, in line with insurance rate surveys that reported double-digit rate increases in some liability lines.

Selected excerpts from the comments include:

Climate Change

The long string of severe natural catastrophes in 2021 (February Texas freeze; German floods; hurricanes Ida and Nicholas; tropical storms Fred and Elsa; western U.S. heatwaves; drought; and wildfires) has insurers wondering how many were driven by climate change. Several (re)insurers evidently believe climate change is to blame, as evidenced by the comments below. RenaissanceRe, in particular, noted its pursuit to understand the influence and impact of climate change through its investment in RenaissanceRe Risk Sciences.

Supply Chain Disruption

Shortages of building materials, microchips and skilled labor have contributed to higher-than-average inflation in recent months. It is unclear whether the increase in the consumer price index (CPI) is the result of demand surge following the reopening of the economy, which suggests the inflation bump will be a temporary phenomenon, or is related to rising wages, which could make higher inflation linger. Insurers are concerned about the immediate effects of higher prices because such prices cause loss payments to increase, which in turn drive up premiums. As shown in the comments below, insurers are recognizing the impact of higher costs in their forward loss projections.

Credit-Based Insurance Scoring

The Travelers responded to a question on the use of credit-based insurance scores and telematics in underwriting. Both Michael Klein, President of Personal Insurance, and Alan Schnitzer, Chairman and CEO, indicated that credit-based score data are powerful variables in pricing auto insurance because they are “very predictive of claim experience, and if you remove it, then you have subsidization in your rate plan between higher risk drivers and lower risk drivers.” R Street’s research into the use of credit-based insurance scores accords with the position that such scores are valuable inputs to ratemaking—and that such use is non-discriminatory.


Chubb commented that the pending infrastructure would be a boon to the insurance industry because it would generate projects that need construction insurance as well as surety bonding.

Global Taxation

RenaissanceRe and Arch Capital commented on efforts to introduce a global minimum tax in President Joe Biden’s proposed changes to taxation. Because the specific provisions have not been finalized, and details on implementation remain unclarified, the Biden tax plan will remain on the watch list, especially for global (re)insurers with an international footprint.


The three issues that got the most air time on the insurance industry’s Q3 earnings calls—social inflation, climate change and economic inflation—have one thing in common: they are exogenous factors, externals over which the industry has little control. The industry is not suffering from poor management of issues about which it does have control, like use of capital, reserving, or pricing. Going forward, R Street will continue to monitor these calls to highlight trend issues and overlaps between public policy solutions and the insurance sector.

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