Inflationary Surge to Increase Claims Severity in Property Lines

Strong recovery from last year’s recession and supply-chain shortages is driving a surge in inflation, and will cause an increase in claims severity for property lines in the short term, according to Swiss Re.

The latest Economic Insights report from Swiss Re forecasts a temporary 10% gain in home construction prices, as well as a medium-term rise in medical and wage inflation that could push casualty claims higher.

At the same time, the reinsurer expects social inflation to continue to push up liability claims.

On the property side, homeowners and commercial property claims severity is set to rise on the back of the current supply-demand imbalance, which is triggering price rises in building materials and also a shortage of labour in the construction sector.

All told, however, Swiss Re expects that the surge in construction-related prices will be temporary and will fade again in 2022.

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