The US casualty insurance market continues to resist broader pricing declines, with rising litigation costs, nuclear verdicts, and social inflation keeping rates firm despite easing conditions across most commercial P&C lines, according to Morningstar DBRS.
Morningstar DBRS reported that commercial property and casualty insurance pricing in the US has softened after several years of increases, with composite rates declining through Q3 2025. The shift has been supported by competitive pressures, ample market capacity following profitable underwriting periods, and lower reinsurance costs. Casualty insurance has not followed this trend, with pricing continuing to rise while most other P&C segments move downward.
The persistence of higher casualty rates is tied to litigation trends and social inflation in the US Claims severity has increased due to larger and more frequent jury awards, including verdicts exceeding $10 million, commonly described as nuclear verdicts. These developments have contributed to rising loss costs and greater uncertainty in long-term claims.
Casualty insurance provides coverage for liability resulting from injury to third parties or damage to property and is often included within P&C policies. Claims are typically long tail, meaning losses may be reported and settled years after the insured event. This timing gap, combined with changes in jury behavior and legal standards, has complicated underwriting and reserving practices.
The report cited research from the US Chamber’s Institute for Legal Reform showing that tort system costs totaled $529 billion in 2022, equal to 2.1% of US gross domestic product and $4,207 per household. Tort costs grew at an average annual rate of 7.1% between 2016 and November 2024 and are projected to exceed $900 billion by 2030.
Litigation activity varies by state, influencing casualty pricing at the local level. Texas recorded more than two million new civil cases in 2024, the highest among US states, followed by Florida, California, New York, and New Jersey. Most casualty cases are resolved in state courts, contributing to uneven rate conditions across regions.
Social inflation has also been linked to legal system abuse and the growth of third-party litigation funding, where outside organizations finance lawsuits in exchange for a share of settlements or awards. This structure can increase incentives to pursue higher damages, including non-economic claims such as pain and suffering.
Despite higher litigation frequency and rising payouts, the US casualty insurance market remains attractive due to its size, product diversity, and pricing flexibility. Insurers continue to adjust underwriting terms, deductibles, coverage conditions, and geographic exposure while managing casualty risks without placing near-term pressure on credit ratings.
