Monica Ningen, CEO of Swiss Re U.S. Property & Casualty Reinsurance, warned that the increasingly volatile U.S. legal environment is undermining insurers’ fundamental ability to accurately price risk.
Concerns about the abuse of the legal system and social inflation in the U.S. insurance market continue to rise. Commercial liability losses will reach US$143 billion in 2023, exceeding the total insured losses from natural disasters in the same year.
“The U.S. liability environment is becoming more volatile and costly, and this is not always visible to the public at large. The increasing size and unpredictability of court decisions makes it more difficult for insurers and reinsurers to confidently assess risk and set prices. Insurance is built on the ability to predict loss trends over time. That foundation is eroded when legal outcomes become difficult to predict,” Ningen said.
Adding: “This has a direct impact on insurers, as higher, more uncertain claims require more capital, tighter underwriting and greater caution in deploying capacity. Over time, these pressures are passed on to the end consumer.
“Businesses may face higher premiums or reduced insurance 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 critical to keeping insurance affordable and widely available.”
Ningen noted that there is evidence that the value of lawsuits is increasing in terms of verdicts, settlements and overall claim severity.
The share of large general liability verdicts has risen sharply since 2014, according to Westlaw, a trend further supported by research from Marathon Strategies, which highlighted a clear increase in “nuclear verdicts.”
Notably, there were 27 lawsuits filed against defendant companies in 2023, with damages exceeding $100 million per lawsuit, an increase of one-third from 2022.
“These major verdicts do not exist in isolation,” Ningen emphasized. “They directly impact settlement behavior. Less than 2% of cases are ultimately decided in court; the vast majority of cases settle before a verdict is reached. However, when juries award larger and larger amounts, these verdicts reset expectations and drive settlement values higher throughout the system.
She continued, “Loss data reflect this dynamic. In 2023, U.S. commercial liability losses reached $143 billion, exceeding global insured natural catastrophe losses in the same year. This comparison highlights the scale of what is happening within the liability system.
“Our behavioral survey research further shows that people are increasingly accepting of large verdicts and that juries are becoming more friendly to plaintiffs. In this environment, the severity of litigation continues to trend upward.”
The complexity of the current environment is further compounded by structural shifts, such as the expansion of lawyer involvement and rapid growth in third-party litigation funding, which are leading to rising costs across the system.
“While insurers are feeling this through higher claims payouts and greater volatility, the ultimate impact extends far beyond insurance balance sheets. Higher litigation costs mean higher premiums for businesses and households, reduced coverage in some markets, and tighter underwriting standards,” Ningen said.
She continued: “For small businesses, this may mean higher operating costs or difficulty obtaining adequate liability protection. For consumers, it may mean paying more for everyday goods and services as companies bear rising insurance costs. In some cases, it may also limit access to insurance options in high-risk areas or industries.”
“Without increased transparency or accountability, the legal environment continues to lead to escalating severity, which may result in insurance becoming more difficult to afford and access, ultimately impacting the economic resilience of communities,” Ningen concluded.
