Litigation Costs Propel US Liability Claims by 57% Over Past Decade, Swiss Re Institute Reports

Swiss Re Institute's latest findings indicate that litigation costs have driven US liability claims to rise by 57% over the past decade. Social inflation, which surpassed economic inflation, peaked at 7% in 2023. This trend is primarily attributed to an increased number of large court verdicts.

Social inflation, observed since the 1980s, causes insured liability claims to grow faster than economic factors like wages and consumer prices. It's driven by trends such as settling compensation claims in court. The phenomenon is now a major concern, particularly in the US, due to high-value awards facilitated by third-party litigation funding (TPLF).

This rising trend has created a costlier environment for insurers. In 2023, US commercial casualty insurance losses grew to USD 143 billion. This figure surpasses the total insured losses from global natural catastrophes of USD 108 billion for the same year.

Other nations like the UK, Australia, and Canada are also feeling the effects of social inflation. In the UK, social inflation contributed more than 10% to liability claims in 2023. Similarly, Australia and Canada saw a 7% rise due to the expansion of mass tort claims.

Potential solutions may include reforms to tort law and greater transparency in TPLF. Insurers are also encouraged to improve risk assessment, defensive tactics, and claims management using new technologies and data analyses.