Liability reserves worsened in 2025

Insurers spent 2025 adding billions to old liability claims they had already booked, a sign that earlier estimates still came up short. (insurancejournal.com) In the United States “other liability (occurrence)” line, carriers reported $7.3 billion of adverse loss development in 2025, according to an S&P Global Market Intelligence report cited by Insurance Journal on April 13, 2026. Adverse development means insurers had to raise reserves for claims from prior years. (insurancejournal.com) The pressure was concentrated in newer accident years, not just old runoff books. S&P said accident years 2021 through 2023 produced $3.9 billion of one-year adverse development, including nearly $3 billion tied to 2022 and 2023 alone. (insurancejournal.com) This line includes excess liability and umbrella coverage, which sit above primary insurance and pay when large claims break through lower limits. AM Best said loss severity in other liability-occurrence rose an average of 11.1% over the decade through 2023. (ambest.com) AM Best tied that trend to “social inflation,” its term for rising claim costs driven by larger jury awards, longer litigation, attorney involvement, and third-party litigation funding. The firm said those forces have made reserves less adequate in several casualty lines. (ambest.com) Regulators were already flagging the same problem before the 2025 numbers arrived. The National Association of Insurance Commissioners said adverse prior-year reserve development in the other liability line totaled $4.7 billion in 2024 and pushed that line’s prior-year net loss ratio to 67.0%. (naic.org) The broader property and casualty industry still posted an underwriting profit in 2024, and the National Association of Insurance Commissioners said policyholders’ surplus rose 6.5% to more than $1.1 trillion. But the same report said social inflation was hitting reserve adequacy in commercial liability lines. (naic.org) Analysts do not see the reserve strain as a one-company problem. Insurance Journal reported that Assured Research estimated a $12.5 billion reserve deficiency for other liability-occurrence, with more than 70% of that gap tied to accident years 2021 through 2023. (insurancejournal.com) Pricing has improved, but claims costs are still running hard. Insurance Journal quoted S&P analyst Tim Zawacki saying rates “do need to go higher,” while warning they may struggle to catch up in some coverages because of competition and social inflation. (insurancejournal.com) AM Best said 2025 rate increases helped offset adverse trends in general liability, but it also warned in March 2026 that softer pricing in many lines could pressure results in 2026. For liability insurers, the reserve story from 2025 is that the old claims are still getting more expensive. (insurancejournal.com)