Non-economic factors are driving a significant share of liability claims growth in the UK, with further increases possible as legal and regulatory reforms reshape the litigation environment, according to a new Swiss Re Institute sigma insights report.

Swiss Re estimates that liability excess inflation (LEI) added approximately 5–6 percentage points to UK liability claims growth in 2024, marking the fifth consecutive year of elevated pressure. Since 2020, non-economic factors have accounted for around half of total liability claims growth, reflecting changes in legislation, litigation practices and claimant behavior.

While the US remains the main source of social inflation, the UK has experienced faster growth in liability excess inflation than several European markets, including Germany.

Swiss Re warns that ongoing reforms concerning third-party litigation funding, collective legal actions and product liability could further increase claims frequency and severity. In particular, broader opt-out class action mechanisms and the potential extension of product liability rules to digital technologies and artificial intelligence could significantly affect insurers' exposure.

The most vulnerable insurance segments include public, product and professional liability, as well as cyber insurance, particularly in construction, engineering and technology-related activities. Environmental liability could also generate substantial claims.

However, the report emphasizes that the ultimate impact will depend on how the reforms are implemented. Greater transparency in litigation funding, safeguards ensuring that claimants remain the primary beneficiaries of settlements, and wider use of alternative dispute resolution mechanisms could help contain costs.

Swiss Re concludes that maintaining a balanced legal framework will be essential to preserving access to justice while limiting excessive claims inflation and protecting the sustainability of liability insurance.

Read the full study here.

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