Legal System Abuse/Social Inflation
Legal System Abuse, Not Just Economic Inflation, Drives Liability Insurance Losses by More than $230 Billion Over Past 10 Years, New Triple-I – Casualty Actuary Society Analysis Shows
Legal System Abuse, Not Just Economic Inflation, Drives Liability Insurance Losses by More than $230 Billion Over Past 10 Years, New Triple-I – Casualty Actuary Society Analysis Shows
A new analysis by the Insurance Information Institute (Triple-I) and the Casualty Actuarial Society (CAS), finds that legal system abuse (LSA) and related litigation trends contributed to $231.6 billion to $281.2 billion found in increased liability insurance losses over the past decade, a surge that far exceeds what can be explained by economic inflation alone.
The report, The Impact of Increasing Inflation on Liability Insurance: 2015–2024, finds that rising jury awards, litigation financing and evolving legal dynamics have driven higher claims costs and defense expenses for personal auto, commercial auto, other liability – occurrence and product liability – occurrence.
“This analysis illustrates that the severe spikes in liability insurance claims losses go well beyond normal economic inflation,” said Sean Kevelighan, CEO, Triple-I. “Legal system abuse, manifested through excessive verdicts and litigation behaviors, has fueled a structural rise in claim costs that continues to increase costs for insurers and policyholders alike.”
Federal report warns of rising 'tort tax'
The US Department of the Treasury’s Federal Insurance Office (FIO) released its Annual Report on the Insurance Industry, revealing growing financial pressures on the property-casualty insurance sector, with third-party litigation funding emerging as a major concern affecting market stability and consumer costs.
The report examines the financial health, regulatory developments, and trends influencing the US insurance industry. Third-party litigation funding – in which outside investors finance lawsuits in exchange for a share of potential settlements – has become a significant factor driving up claims costs, according to the findings.
“The Federal Insurance Office’s 2025 Annual Report underscores the growing pressures facing the property-casualty insurance sector, with an emphasis on the impact of legal system abuse,” said Sam Whitfield, senior vice president of federal government relations and political engagement at the American Property Casualty Insurance Association (APCIA). “These factors are driving up costs for insurers and, ultimately, for families, who are now paying significantly more for coverage.”
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The rise in litigation funding contributes to what industry officials call a “tort tax” – an average annual burden exceeding $5,000 per household. The APCIA supports federal legislation, including the Litigation Transparency Act of 2025 and the Protecting Our Courts from Foreign Manipulation Act of 2025, to address the practice.
Financial Results
Gallagher sees prices still rising, reports 20% growth
Commercial insurance rate increases continue to outweigh decreases, despite falls in property insurance pricing, Arthur J. Gallagher & Co.’s top executive said Thursday.
The brokerage continues to see mid-to-high single-digit increases in premiums across several casualty lines, said J. Patrick Gallagher Jr., chairman and CEO, on a call with analysts discussing Gallagher’s third-quarter results.
Gallagher reported more than 20% revenue growth for the period, in which it closed its largest-ever acquisition.
Global property insurance renewal premiums fell 5% in the quarter, Mr. Gallagher said.
“I think the property market is going in a direction that makes some sense, given the fact that they’ve got good results,” he said.
Casualty rates were up 6% overall, with workers compensation up 1%, general liability 4%, commercial auto 5% and umbrella liability increased 8%, Mr. Gallagher said. U.S casualty lines are up 8%, he said.
Directors and officers liability rates were down 2%.
Gallagher reported $3.33 billion in revenue for the third quarter, a 20.2% increase over the same period last year. On an organic basis, which excludes the effects of acquisitions and foreign currency fluctuations, revenue rose 4.8%.
Gallagher closed six acquisitions in the third quarter, including the $13.8 billion acquisition of AssuredPartners, which closed in August.
Ryan Specialty posts organic growth rate of 15% for Q3'25
International specialty insurance firm, Ryan Specialty, saw its revenue grow 24.8% to $754.6 million for the third quarter of 2025 when compared with the prior year, with an organic growth rate of 15%.
Ryan Specialty attributes the improved revenue to continued organic growth, driven by new client wins and expanded relationships with existing clients, as well further expansion of the specialty and E&S markets, revenue from acquisitions, changes in contingent commissions, and also the impact of foreign exchange rates.
The company reports that it saw growth across most of its casualty lines, with modest growth in property across all three specialties.
For the third quarter of 2025, operating expenses increased 23% year-on-year to $643.8 million, driven mostly by higher compensation and benefits expenses, partially offset by a decrease in restructuring and related expenses, lower equity-based compensation, and lower acquisition related long-term incentive compensation.
Commentary/Opinion
Have we reached peak Berkshire Hathaway?
Warren Buffett's insurance companies and investments span the globe - but the golden age may be over
Warren Buffett’s planned departure as chief executive of Berkshire Hathaway is shaking investor confidence in the conglomerate he built over six decades, as analysts warn that the company’s diverse businesses face simultaneous headwinds from falling interest rates, shifting trade patterns, and declining profitability in key insurance lines.
Keefe, Bruyette & Woods downgraded Berkshire to underperform this week, a rare move for one of Wall Street’s most widely held companies. The brokerage reduced its price target on the firm’s Class A shares to $700,000, implying a modest decline from recent trading levels, and warned that “many things [are] moving in the wrong direction.”
The report from KBW analyst Meyer Shields cited a confluence of pressures: weakening earnings across several divisions, the phaseout of renewable-energy tax incentives, and what he described as “Berkshire’s historically unique succession risk.”
Mr. Buffett, 95, announced in May that he will step down as chief executive at the end of the year, handing control to Vice Chairman Greg Abel, who oversees the company’s non-insurance businesses. The billionaire investor will remain chairman.
News
This insurance company wants to lower its rates ... again
Florida homeowners have struggled the past few years with rising insurance costs, but we have some good news to share.
For the second year in a row, Security First Insurance, based in Ormond Beach, is looking to lower its rates.
"Security First just filed for an additional 8% decrease on our biggest homeowner's product," said Melissa Burt DeVriese, the company's president. "While many Floridians continue to face rising insurance costs, Security First is moving in the opposite direction."
The rollback follows a 5.2% decrease in 2024 for the company.
It comes at a time when many policyholders are still struggling with insurance costs across the state.
Global property insurance rates tumble as catastrophe losses ease
Global property premiums continue to soften, with the latest Marsh Global Insurance Market Index (GIMI) reporting their steepest drop in recent years. The primary driver behind this decline is a relatively quiet year for natural catastrophes. Even after Hurricane Melissa’s headline grabbing destruction in Jamaica, 2025 could still close following one of the insurance industry’s most benign six-month periods for nat cat losses in recent memory.
According to Marsh, global average property rates fell 8% in Q3, fuelled by heightened competition among insurers. The Pacific region saw the sharpest decline, with rates plunging 14%.
“It’s been a really interesting year,” said Scott Eccleston (pictured above), Marsh’s head of risk management in the Pacific.
Five years of heavy losses, but 2025 turns a corner
2025 follows five consecutive years of natural catastrophe losses exceeding US$100 billion. Early in the year, it appeared this trend would continue – perhaps even worsen. January’s devastating Palisades Fire in Los Angeles destroyed nearly 7,000 homes and businesses. By June, claims from that event had already pushed the market past US$80 billion in nat cat losses, according to Swiss Re and Munich Re.
AI in Insurance
AI Agents in Insurance: Why Interoperability Matters | Insurance Thought Leadership
AI agents aren't just another layer of automation—they mark a fundamental shift in how insurers can scale decision-making and operations. Unlike traditional tools, they can interpret context, provide recommendations and carry out tasks across multiple systems. For insurers, this isn't about just answering questions—it means executing real work and driving measurable outcomes.
For example, an underwriter can ask an AI agent to review broker submissions, extract risk data and suggest pricing tiers based on historical patterns. A business analyst can use an AI agent to analyze customer lifetime value and identify new retention strategies. A product manager can even have an AI agent configure new insurance products based on specific business requirements. These agents accelerate operations and improve efficiency while leaving judgment and final decisions in human hands.
AI EXPERIMENTATION IS NOT ENOUGH
The potential is clear, but the reality is more complicated. According to Boston Consulting Group, 67% of insurers have experimented with AI, but only 7% have scaled it across their organizations. That means the vast majority remain in pilot mode, running isolated experiments that rarely expand into enterprise-wide capabilities.
That gap between promise and practice is where insurers risk falling behind. AI agents can deliver real value, but not if they remain trapped in proofs of concept. Scaling requires more than one-off pilots—it demands modern infrastructure, aligned leadership and interoperable systems that can evolve alongside the technology itself. CONTINUES
Sonny Patel, chief product and technology officer, Socotra
InsurTech/M&A/Finance💰/Collaboration
AIG part of $7 billion deal to buy Convex
Canadian asset manager Onex said on Thursday it has teamed up with U.S.-based insurer AIG to buy privately held specialty insurer Convex Group in a $7 billion deal.
Dealmaking has made a sharp comeback as corporate boardrooms become inured to persistent uncertainty and pursue acquisitions in their quest for growth.
As part of the deal, Onex and AIG will take stakes of around 63% and 35%, respectively, in the firm, with the rest held by Convex’s management.
The deal gives AIG access to a fast-growing specialty insurer with a complementary risk profile.
Earlier this week, AIG had also announced it would acquire the renewal rights for a majority of Everest Group’s retail insurance portfolios worldwide.
The acquisition of Convex will strengthen Onex’s presence in the insurance sector and boost the profitability of its asset management business, the company said.
AIG will also take a 9.9% stake in Onex and commit $2 billion to the asset manager’s private equity and credit strategies over the next three years.
“These strategic investments are a great use of our capital with no operational, technical or integration risks,” said AIG CEO Peter Zaffino.
Convex was founded in 2019 by Stephen Catlin and Paul Brand in partnership with Onex Partners V and its co-investors.
The company has since rapidly scaled into a major specialty property and casualty insurer with operations in Bermuda, London and Europe. It expects up to $6 billion of gross premiums in 2025.
AIG to Acquire Renewal Rights for a Majority of Everest Group’s Retail Insurance Portfolios Worldwide
American International Group, Inc. (NYSE: AIG) today announced that it has entered into definitive agreements to acquire the renewal rights for a majority of Everest Group Ltd.’s (NYSE: EG) retail insurance portfolios worldwide, representing in aggregate approximately $2 billion of premium. Exposure to all liabilities will remain with Everest, who will also continue to administer claims with respect to its policies.
"We expect these renewal rights transactions to drive incremental growth in our general insurance portfolio, and we will be able to write these policies within our existing balance sheet with no incremental capital required,” said Peter Zaffino, Chairman & CEO, AIG. “Jim Williamson, President and CEO of Everest Group, and the underwriting team at Everest have done a very good job repositioning Everest’s global retail insurance portfolio, and we see these portfolios as very additive to our business. We look forward to working closely with the Everest team to ensure a seamless transition for clients and brokers, while continuing to meet their needs with world-class solutions and exceptional service. AIG will continue to work with Everest Group as a key reinsurance partner.”
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