It may be a few more years before prices completely catch up with loss inflation trends in casualty insurance, according to a top Swiss Re AG executive.

So-called social inflation — rising litigation and jury awards — has been pushing up casualty insurance claims in recent years, particularly in the U.S. The phenomenon has prompted concerns that there are shortfalls in U.S. casualty insurers' reserves and several big-name insurers have added to their provisions. Insurers have also hiked prices to try and compensate for the rising claims.

Speaking on a panel at S&P Global Ratings' Global Reinsurance Conference on Oct. 28. Moses Ojeisekhoba, Swiss Re's reinsurance CEO, said both the primary and reinsurance markets are taking claims inflation "very seriously" and the issue has not taken a backseat during the COVID-19 pandemic.

Insurers and reinsurers have begun to respond "significantly" to the loss trends, Ojeisekhoba said, with a combination of price increases and exposure reduction by lowering coverage limits and withdrawing from certain industries. He said the primary insurance market began to make changes in 2018, but things really started to accelerate in the latter part of 2019.

"We see that coming through in 2020, and the expectation is that will move in through 2021 and probably even in 2022 given the scale of the inflation that is seen in some of the judgments," he added.

The COVID-19 pandemic could add to the casualty challenge, according to Ojeisekhoba. Interest rate cuts to combat the pandemic-induced economic downturn "clearly has an impact on longer-tail lines" such as casualty.

"I think that exacerbates the issue without a doubt," he said.

And although social inflation is often talked about in the context of U.S. casualty business, Ojeisekhoba said the issue is not limited to the U.S. The trend is being fueled by changing social attitudes and "significant funding to pursue litigation" in the U.S., U.K. and Australia, he said, and other countries are likely to follow.

As the issue persists, reinsurers might opt to cede commissions they pay to the insurers that buy their cover to compensate them for administrative, underwriting and business acquisition expenses. Ojeisekhoba said that where ceding commissions "significantly exceed" the ceding insurer's expenses "it creates a situation where you don't quite have the same alignment of interests and I think this is something we also expect to be addressed."