A look at two new (surprising) drivers in catastrophic exposures
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The increasing frequency of catastrophic exposures greatly challenges today’s managed-care reinsurance market. Catastrophic-claim “horror stories” now refer to exposures in excess of USD 5m-USD 10m, whereas a few years ago this threshold used to “only” be USD 2m; that latter amount now instead seems to be a working layer. This trend is driven by the rapid progression in healthcare technology and new specialty drugs that can relieve human suffering. To that point, historical large claim (USD 1m+) frequency experienced a near doubling in growth from 2012-2016, according to Swiss Re’s large-claim study on US commercial health-plan costs. Among the key medical conditions driving the trend, two conditions stand out: hemophilia and hereditary angioedema (HAE).
Reinsurers will need to adequately model risk in the excess coverage rating, provide care management services to their clients to help them contain costs, and consider innovative reinsurance solutions. That may include carve-out coverage for these type of special and extremely expensive conditions.