Social inflation is the main growth driver of US liability claims

Social inflation has become the main growth driver of US liability claims, according to Swiss Re’s new report, published September 7: “Social inflation: indexing liability claims trends”.

Primarily due to a rising number of large court verdicts, social inflation increased liability claims in the US by 57 percent in the past decade and reached an annual peak of 7 percent in 2023.

Swiss Re said in the report that it expects social inflation in the US to continue for the foreseeable future, and that it will remain mostly a US phenomenon. While economic inflation is abating, there are no signs of a letup in social inflation pressures.

“It will remain mostly a US phenomenon.”

It states that its view is that the current rate of increase is unsustainable: Swiss Re estimates that the impact on casualty business in the US will outweigh the earnings benefit of higher interest rates within one to two years.

Gianfranco Lot, Swiss Re’s chief underwriting officer P&C Re, said: “We observe continuous increases in aggressive litigation practices that are especially problematic for liability insurance. Over the past five years, US liability lines exposed to bodily injury claims recorded cumulative underwriting losses of $43 billion. In response, capacity available to global businesses has significantly declined, while rate increases have not kept pace with loss trends.”

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