Litigation costs drive US liability claims by 57% over past decade, reveals Swiss Re Institute

Swiss Re Ltd / Key word(s): Research Update Litigation costs drive US liability claims by 57% over past decade, reveals Swiss Re Institute 07.09.2024 / 14:00 CET/CEST Social inflation exceeds economic inflation in driving growth of US liability claims, peaking at 7% in 2023 for first time in two decades Social inflation emerging as main driver behind rising US liability claims, leading to underwriting losses, heightened uncertainty and reduced insurance capacity for businesses across the world Signs of social inflation impacting the UK, Australia and Canada due to expansion of mass-tort claims; trend likely to spread to EU countries, given more accessible litigation funding and legal reforms broadening product liability and collective redress Zurich, 7 September 2024 – Social inflation has become the main growth driver of US liability claims, according to Swiss Re Institute‘s new Social Inflation Index. Primarily due to a rising number of large court verdicts, social inflation increased liability claims in the US by 57% in the past decade and reached an annual peak of 7% in 2023. Social inflation is a phenomenon observed since the 1980s, where insured liability claims increase faster than can be explained by economic factors, such as wages or core consumer price inflation. It is driven by a range of socioeconomic, legislative and litigation trends such as an increased tendency to settle compensation claims in court and is most pronounced in the US, where tort law is based on precedent and court cases are adjudicated by juries. In addition, third-party litigation funding (TPLF) – the process by which litigants and law firms can fund their litigation with the help of a third-party investor – facilitates access to trial, and the legal system allows for the payment of large sums of compensation, particularly for bodily injury claims. In 2023 alone, there were 27 court cases awarding compensation of more than USD 100 million each.