The increasing volatility of the U.S. legal environment is undermining the fundamental ability of insurers to price risk accurately, warns Monica Ningen, CEO, P&C Reinsurance U.S. at Swiss Re.
Concerns over legal system abuse and social inflation continue to rise across the U.S. insurance market, with commercial liability losses reaching $143 billion in 2023, surpassing the total insured losses from natural catastrophes for the same year.
“The U.S. liability environment is becoming more volatile and more costly in ways that are not always visible to the broader public. Court awards are increasing in size and unpredictability, which makes it harder for insurers and reinsurers to assess risk and set prices with confidence. Insurance is built on the ability to forecast loss trends over time. When legal outcomes become less predictable, that foundation is weakened,” Ningen stated.
Adding: “This directly affects insurers because higher and more uncertain claims require more capital, tighter underwriting, and more caution in deploying capacity. Over time, those pressures flow through to end consumers.
“Businesses may face higher premiums or reduced coverage. Individuals ultimately bear the cost through higher prices for goods and services, or through insurance that is more expensive and harder to obtain. A stable and transparent legal framework is essential to keeping coverage affordable and widely available.”
Evidence suggests that the value of litigation is increasing across verdicts, settlements, and overall claims severity, Ningen noted.
The share of large general liability verdicts has risen sharply since 2014, according to Westlaw data, a trend further supported by Marathon Strategies’ research, which highlights a clear increase in “nuclear verdicts.”
Notably, 2023 saw 27 lawsuits against defendant companies result in awards exceeding $100 million each, representing a one-third increase compared to 2022.
“These headline verdicts do not exist in isolation,” Ningen highlighted. “They directly influence settlement behaviour. Fewer than 2% of cases are ultimately decided in court; the vast majority settle before reaching a verdict. However, when juries award increasingly large sums, those awards reset expectations and drive higher settlement values across the system.
She continued, “Loss data reflects this dynamic. U.S. commercial liability losses reached $143 billion in 2023 exceeding global insured natural catastrophe losses in the same year. That comparison underscores the scale of what is happening within the liability system.
“Our behavioural survey research further indicates growing approval of large verdicts and increasingly plaintiff‑friendly jury attitudes. In that environment, litigation severity continues to trend upward.”
The complexity of the current environment is further compounded by structural shifts, such as expanded attorney involvement and the rapid growth of third-party litigation funding, which are contributing to higher costs across the system.
“While insurers feel this through higher claims payouts and greater volatility, the ultimate impact extends well beyond insurance balance sheets. Higher litigation costs translate into higher premiums for businesses and families, reduced availability of coverage in certain markets, and stricter underwriting standards,” Ningen said.
She continued: “For small businesses, that can mean higher operating costs or difficulty securing adequate liability protection. For consumers, it can mean paying more for everyday goods and services as companies pass through rising insurance expenses. In some cases, it can also limit access to coverage options in higher risk areas or sectors.”
Ningen concluded: “A legal environment that consistently produces escalating severity without greater transparency or accountability risks making insurance less affordable and less accessible, ultimately affecting the economic resilience of communities.”
