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Understanding and managing social inflation: A growing challenge for multinationals

Social inflation — fueled by changing social, political, legal, and economic factors — is steadily driving up insurance costs.
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By Neville White , 

Senior Casualty Placement Broker, Client & Customer Services

17/02/2026 · 5 minute read

Social inflation — fuelled by changing social, political, legal, and economic factors — is steadily driving up insurance costs. Although most prevalent in the US, its effects are increasingly being felt in the UK and beyond, creating new challenges for multinational companies, according to Neville White, Marsh Placement Specialist.

What is driving social inflation?

The concept of social inflation is not new. Over 45 years ago, Warren Buffett warned Berkshire Hathaway shareholders that rising insurance costs, fuelled by social inflation — the rising costs and risks associated with liability claims, driven primarily by societal attitudes, court decisions, and the overall cultural shift towards holding companies accountable — would affect the insurance sector. Today, several factors continue to influence this trend:

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Collective redress mechanisms enable claims to be brought on behalf of large groups or classes of individuals, significantly increasing the volume of claims and the number of claimants. This surge could lead to higher litigation funding, greater claims costs, and the potential application of these mechanisms to emerging risks. England and Wales (as well as the US and the Netherlands) have established collective redress systems, offering plaintiffs multiple avenues to pursue claims.

For example, in England and Wales, mechanisms such as Group Litigation Orders and Multiple Joint Claims allow numerous parties to consolidate their claims, streamlining legal proceedings but also amplifying potential liabilities. The total cumulative value of class actions across the UK reached €155 billion in 2024.

There is continued growth in the number of claims across Europe, with 97 claims filed in 2024.

Litigation funding involves third parties covering legal costs in exchange for a share of any recovered proceeds. It makes large-scale litigation more viable, potentially leading to an increase in both the number and size of claims, less financial pressure to settle claims, and higher legal costs. In the UK, litigation funding is steadily growing and is supported by a voluntary self-regulation framework overseen by the Association of Litigation Funders, which enforces a code of conduct to uphold ethical standards. In the EU, the European Commission recently published proposals for legislation to regulate third-party litigation funding.

New and emerging risks — such as climate change, product liability, forever chemicals (or PFAS), and data breaches — are creating additional opportunities for social inflation as they may be more prone to higher payouts. Additionally, in the UK, claimant law firms specialising in mass torts and class actions are actively raising public awareness, further driving social inflation.

Nuclear verdicts, also called shock verdicts, are almost entirely specific to the US. They refer to US civil jury awards of $10 million or more for a single case, while “thermonuclear verdicts” describe awards exceeding $100 million. These large verdicts drive social inflation by causing insurer costs to rise unpredictably, beyond normal economic factors.

Implications for insurance

Social inflation has the potential to increase both the cost and frequency of insurance claims beyond what traditional actuarial models predict. As a result, some insurers respond by raising premiums, growing reserves, and tightening underwriting standards to manage the heightened risks and financial uncertainty.

“Bad news makes it more difficult to place business,” said Neville White. “It becomes harder to find underwriters willing to provide capacity for a risk, and they may charge more as a result.”

However, these challenges can be managed through proactive risk management. For example, leveraging telematics technology — which combines telecom and informatics to monitor remote assets — offers significant benefits in the automotive industry by tracking driving behaviours and providing insights that improve risk management and targeted training, which can help reduce the number of accidents. Greater transparency regarding risks typically leads to better insurance opportunities.

Multinational companies operating in the US should carefully assess the risks most vulnerable to social inflation and those that insurers consider high risk.

Finally, early identification of potential runaway legal cases is crucial, and information should be shared across both master and local insurance programmes. Analytics tools, including AI-based ones, can be used to stress-test strategies. Meanwhile, mock trials — such as one panellist’s example of 100 individuals randomly selected to simulate jury reactions — can be used to prepare for major cases.

How Marsh Risk can help

Our team of specialists is committed to helping multinational organisations prepare for and respond effectively to the risks posed by social inflation. We provide risk assessments to identify and evaluate potential social inflation exposures, along with technical and organisational support to strategically manage high-risk claims. We collaborate closely with clients to design insurance programmes that address rising litigation costs and increasing jury awards. Additionally, we develop both pre- and post-loss risk mitigation strategies leveraging data and analytics to create tailored solutions.

For more information on social inflation and how Marsh can support your multinational organisation, please get in touch with your Marsh risk advisor.

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