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.”
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.
“That is why APCIA strongly supports federal legislation like the Litigation Transparency Act of 2025 and the Protecting Our Courts from Foreign Manipulation Act of 2025, which aim to bring much-needed transparency and accountability to this shadowy practice,” Whitfield said.
The report highlights successful litigation reforms in Florida, where legal filings dropped by more than 30% following new regulations. Insurers in the state have begun lowering costs or issuing refunds to customers.
“These reforms demonstrate that smart, targeted legal reforms can stabilize the market, reduce costs, and deliver real savings to consumers,” Whitfield said.
The FIO report also documents the insurance industry’s role in advancing resilience through mitigation investments, climate adaptation support, and collaboration with public agencies.
“If we want to improve affordability and availability, we must allow competitive private markets to price risk appropriately and invest in mitigation and resilience programs that reduce losses before they happen,” Whitfield said.
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