Liability excess inflation pressures are a top concern for insurance carriers, especially in the United States, according to the new Swiss Re Liability Excess Inflation report. Swiss Re's Liability Excess Inflation (LEI) index measured the growth in liability claims and found that the U.S. reached a 7% growth in 2024, with an average of 6% between 2019 and 2023.
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Swiss Re defines "liability excess inflation" as the rise in insurance claims costs and severity driven by non-economic factors. In the U.S., this is also referred to as legal system abuse and social inflation. According to Swiss Re's research, the main drivers for elevated liability claims costs–changes in material law, ease of access to litigation, an increased use of third-party litigation funding and rising damage awards–only continue to grow and show no signs of abating.
"U.S. Litigation costs keep rising, and we now see similar dynamics beginning to emerge in parts of Europe. The surge in nuclear verdicts and expanded litigation funding are driving up legal expenses and settlement demands in the U.S.," Urs Baertschi, Swiss Re CEO of property and casualty reinsurance, in the press release. "These costs ultimately act as a tax on consumers by increasing costs for goods and services, including insurance. Greater transparency around litigation funding is essential to legal system reform and critical to curb further systemic cost increases and the financial pressure that places on every household."
Swiss Re's "2025 Behavioral Social Inflation Study", conducted in the U.S. in 2025, revealed that litigation culture is a growing strain on the civil justice system and that juror sentiment has shifted largely toward plaintiffs. Among American respondents, 75% said that litigation awards in lawsuits are too low, up 18 percentage points from 2016. Most respondents, 85%, said that large organizations prioritize profit over safety, and 79% see punitive damages as the best deterrent for corporate wrongdoing. According to Swiss Re, the number of nuclear verdicts has more than quadrupled since 2020 and the median value has more than doubled.
Swiss Re developed the LEI index in 2024, measuring liability excess inflation as the difference between claims severity growth and growth in economic claims inflation factors. Swiss Re subtracts real gross domestic product (GDP) growth from claims growth to remove
the impact of economic activity on exposures and also subtracts actuarial assumptions
for claims frequency.
