{ “title”: “Social Inflation Remains a Key Concern for U.S. Insurers, Report Finds”, “description”: “A new report from Lockton highlights challenges and opportunities in the U.S. property and casualty insurance market.”, “tags”: “insurance, social inflation, P&C insurance, Lockton, market trends”, “rewritten_content”: “## Social Inflation Remains a Key Concern for U.S. Insurers, Report Finds
The U.S. property and casualty (P&C) insurance market started 2025 with a measure of stability, according to the latest Lockton Market Update. However, the report highlights several factors creating challenges for insurers and policyholders.
Rising litigation costs, economic uncertainty, and evolving risk factors are all impacting the market. The quarterly report from Lockton examines key trends shaping the commercial insurance sector. While capacity has been maintained across most major lines, certain segments face pressure.
Industry Pressures and Market Trends
One of the primary concerns identified in the report is social inflation. This phenomenon continues to drive up claims costs, especially in liability lines. Social inflation reflects the impact of factors beyond traditional economic inflation, such as increased litigation, larger jury awards, and changes in legal interpretations.
The growing impact of “nuclear verdicts” – jury awards significantly exceeding historical norms – has led to tighter underwriting practices and rising premiums, particularly in general liability and excess casualty coverage.
Catastrophic weather events also play a role in market conditions. The report noted that while the frequency of severe storms, wildfires, and other climate-related losses has kept property insurance rates elevated in high-risk regions, improved risk modeling has brought some pricing stability elsewhere .
Despite these challenges, the report also identifies areas of opportunity. The workers’ compensation market, for instance, remains competitive due to strong underwriting results and improved workplace safety measures. Directors and officers (D&O) liability coverage has also softened after years of hard market conditions, spurred by increased competition among insurers and regulatory clarity.
Cyber insurance, once experiencing sharp price increases due to ransomware threats, has begun to level out. This is partly because insurers have improved risk assessments and businesses have implemented stronger cybersecurity controls. The report also notes that evolving risks associated with artificial intelligence and increased regulatory scrutiny could influence long-term pricing trends.
Managing Risk in a Shifting Market
“Major industry headwinds such as social inflation, natural catastrophes, climate change, trade wars, tariffs, and regulatory changes are adding to the market uncertainty,” said Vince Gaffigan, executive vice president and director of risk consulting at Lockton. “Now, more than ever, businesses should be reevaluating their insurance programs to safeguard their operations and protect their balance sheets.”
Looking ahead, the report anticipates continued volatility in liability lines. Property insurers will continue to assess their exposure to climate-related risks. The financial strength of insurers, future regulatory developments, and broader macroeconomic conditions will all contribute to shaping the market.
Lockton’s report suggests that insurance buyers who proactively assess their risks, adjust coverage strategies, and work closely with brokers and underwriters will be better positioned to navigate market fluctuations throughout 2025.
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