Claims trends

Since 2003, Willis Towers Watson’s P&I reviews have routinely highlighted trends towards greater volatility in overall claims levels.

The market has seen inflationary increases on small and medium sized claims averaging about 3-4% per year over the last 16 years. Around this relatively low level inflationary background however, the number and size of very large claims has varied enormously. This unpredictability of very large claims, combined with increased club and IG retentions, has created enormous volatility in total claims levels in the market.

This is exemplified in the two most recent years. In both years an absence of a significant number of high value claims has been the primary driver in the very positive results seen in 2015/16 and 2016/17.

A sharp reduction, or a lull, in total claims levels is every much as part of the overall picture of volatility as the years with double digit increases in claims levels. In these ‘unlucky’ years (2003/04, 2004/05, 2006/07, 2009/10 and 2011/12) the material increases in the number of high value claims were key drivers in the overall negative underwriting results in those years.

The background to this has been discussed at length in previous reviews and will be developed further in the IG Reinsurance section of the review.