Liberty Mutual’s Dolan: PFAS “emergent” and a very real threat

Increasing regulatory scrutiny around so-called forever chemicals is driving greater risk awareness, with Matt Dolan, president of North America specialty at Liberty Mutual Insurance and its Ironshore unit, telling The Insurer TV that the types of businesses affected are broad, including all kinds of consumer products.

One area where per- and polyfluoroalkyl substances – or PFAS – have perhaps drawn the most attention is around contamination of drinking water.

Analysis of the latest US Environmental Protection Agency data found that as many as 26 million Americans are exposed to PFAS-contaminated water.

Dolan said the extent of potential danger from PFAS has yet to be fully quantified, but added: “I do think it's not hyperbole to think about it as potentially the new asbestos. It's got that kind of potential. We don't know that it will get there yet, but it has that kind of potential feel to it.”

However, he emphasised that Liberty Mutual has been aware of the PFAS dynamics since about 2016, so has a lot of experience helping insureds overcome these emerging threats.

“That has certainly given us, I think, an intellectual edge and intelligence edge as far as identifying and navigating through the PFAS dynamic,” said Dolan.

“It's yet to be fully quantified, but when you are a specialist and focused on a certain industry segment, it gives you the opportunity to get out ahead and be responsive, both in how you structure risk, and in how we advise clients about this emergent issue,” he added.

Inflation and nuclear verdicts

Another potential issue for insurers is inflation, both economic and social.

“Economic inflation has a very direct impact on first-party products like property, medical inflation, cost of hospitalisations and pharmaceuticals,” said Dolan.

Inflation has impacted some of the firm’s cost containment products in the healthcare group. But another area of concern for Dolan and his team is social inflation.

“We look at judgments across the country, both within our own portfolio and in the industry, and what we're seeing is a steady increase in severity, and that makes pricing liability products – casualty, financial lines, healthcare liability products – just more and more difficult,” said Dolan.

But deciphering where nuclear jury verdicts will emerge is hard to pin down.

“It is multi-dimensional and very nuanced,” said Dolan.

“It's hard to rush in and assume that this is now a different kind of litigation environment in this particular state. You do have to give it a little bit of time to season through and see if the tort reform changes will indeed hold,” he added.

The threat environment around weather is“as acute as it’s ever been”

Dolan also commented on so-called secondary perils, which are continuing to inflict significant losses on insurers.

“Certainly, we believe that climate change is a factor. We see evidence of irregular weather patterns. We see hotter, wetter and faster storms. We see the incidence of flooding,” Dolan told The Insurer TV.

And he said there’s evidence that secondary perils will continue to be more and more challenging, with the threat environment around weather as acute as ever.

“We have to be really, really thoughtful about how we think about our insureds’ exposure to weather, whether they be coastal, whether they be in tornado alleys, whether they be cat prone, or secondary peril, or storm prone,” said Dolan.

And because of the uncertainty, Dolan said his team is working to price and structure risk accordingly.

“We write on an E&S basis, in my particular group, we write wind-exposed property cat. That's where the action is. It's where the risk is, not exclusively, but acutely.”

Dolan and his team rely on sophisticated models and analytics to home in on secondary peril risk, to respond thoughtfully to the new normal in an extreme weather environment.

Specialty markets evolving rapidly

The specialty market is another dynamic space where the risk is rapidly evolving.

“It’s as fluid and as dynamic and as complex a risk environment as I've ever seen. And I've been underwriting in one way or another for over 30 years,” said Dolan.

“It's emergent. It's got a lot of co-dependencies. And as such, we think there's tremendous opportunity and there is a real need for responsive expert contemporary risk solutions, whether that be in financial lines and thinking about how we structure response to risk transfer solutions against the backdrop of a disrupted economic environment, whether that be domestically or internationally.”

Ultimately, Dolan said the specialty markets and financial lines space present a tremendous growth opportunity, one that demands bespoke and customised solutions.

Another rapidly growing area is the cyber market, which he described as “the epitome of emergent and dynamic risk”.

“We will look to grow in that space as a response to that, so financial lines and cyber are two areas. Healthcare continues to be a massive component of the US GWP. We have a product suite that is responsive to almost all aspects of healthcare delivery across the spectrum: pre-acute, acute, post-acute.”

Watch the full interview with Liberty Mutual’s Matt Dolan for more insight into today’s market issues.