(Re)insurers will continue to face rising claims severity, driven by a combination of economic inflation, social inflation and regulatory instability. Escalating verdicts and unpredictable settlement demands, fuelled by shifting social attitudes and increasingly polarised perceptions of corporate actors and behaviour, will continue to heighten uncertainty and push claims costs higher. Global economic volatility will further complicate claims forecasting, while economic inflation will continue to increase claims costs and reinstatement. The persistence of 'once in a lifetime' claims events has continued a trend towards early claims resolution, often at high values, reflecting the market's increased awareness, and weariness, of unpredictable outcomes.

The number of claimant personal injury firms has declined by 35.4% in the last five years, and larger firms are taking a bigger piece of the market share. This trend shows no signs of abating. Falling numbers of claims and fixed recoverable costs will continue to push the claimant sector towards consolidation. Those firms capable of adapting to changing market conditions are likely to do better. This will require flexibility, innovation and the financial and human resources necessary to facilitate them, all favouring larger firms. This consolidation can reasonably be anticipated to impact on claims handing generally, particularly if it leads to more standardised and consistent approaches to claims progression. The impact from a defendant/insurer perspective remains to be seen.

The effectiveness of the UK's opt-out class action regime in the Competition Appeals Tribunal (CAT) is under the spotlight. A decade on from the introduction of the opt-out collective actions regime in competition law, the government has launched a review of its operation. Concerns exist that consumers are not obtaining meaningful redress and businesses are being disproportionately burdened. These have been heightened by the nine year legal battle in Merricks v Mastercard, which settled for just 2% of the pleaded claim value, and the CAT's dismissal of its first consumer trial (Le Patourel v BT Group PLC) which found that BT's pricing was not unfair or an abuse of dominance. The government is now exploring alternative dispute resolution and voluntary redress schemes to better balance consumer justice with business impact. This review comes swiftly after the Civil Justice Council (CJC) recommended in June 2025 that legislation be introduced swiftly to clarify litigation funding agreements  are not damages-based agreements, reversing the impact of the Supreme Court decision in PACCAR and the significant uncertainty created. The CJC also recommended the 'light-touch' regulation of the litigation funding market with enhanced regulation in consumer claims. The CJC proposals are likely to lead to continued growth of litigation funding in the UK and provide for a more stable, regulated environment in which funders have confidence in the enforceability of funding agreements.

The education sector remains under intense financial pressure at all levels. In mainstream settings, budget challenges remain with increased demand for special educational needs and disabilities support. Independent schools continue to feel the impact of the change in VAT legislation, with more than 50 schools closing or announcing plans to close. Falling student numbers have led other schools to undergo mergers or acquisitions. Universities are also under significant financial pressures with falling international admissions and frozen fees resulting in courses and departments being closed. The recent merger of the Universities of Kent and Greenwich may be the first to come in a series of mergers/collaborations. The resulting impact on student/parent choice and the quality of teaching and resources is likely to be a significant risk for educational institutions but might create significant opportunities for those able to provide compelling, high quality specialist or differentiated programmes.

Although government and regulators have stated a continuing commitment to the development of sustainable finance, the approach to environmental, social and governance (ESG) considerations generally is now only through the lens of promoting growth and competitiveness of UK markets. It is perhaps notable that the Financial Conduct Authority (FCA) Strategy for 2025-2030, published in June 2025, makes no reference to ESG.  In March 2025, the FCA announced that it would not be proceeding with proposed diversity and inclusion requirements for regulated firms.  In August 2025, it further announced that it is considering how to streamline the existing sustainability reporting requirements on firms.  For the year ahead we expect this trend to continue, with no new regulatory initiatives and a focus on streamlining existing requirements.

The government and regulators will continue moving towards more proportionate and competitive regulation, but this process will be evolutionary, not revolutionary. The Leeds Reforms set out in July 2025 included proposals to deliver a new framework for captive insurance in the UK, and scale back the Senior Managers and Certification Regime, reducing by around 40% the number of roles for which an insurer needs regulatory pre-approval. The Financial Conduct Authority is also proposing scaling back its Consumer Duty and certain other rules as they apply to the wholesale insurance market. While several changes can be made relatively quickly, it will take time for the benefits to be felt. Without more radical reform, including scaling back the regulatory perimeter and re‑writing the rulebooks, UK financial regulation will remain complex and challenging to navigate.

Outside the United States, the impact of social inflation is seen most starkly in Mexico, and we predict that the way damages are awarded in civil litigation in Mexico may now influence the United States and other jurisdictions. Legislative efforts to challenge social inflation continue in the United States, with some states enacting legislation to mitigate the risk of nuclear verdicts, challenges to claimant strategies such as 'anchoring arguments' and the capping of non-economic damages in certain claim types. The risk of juries awarding outsized punitive damages awards will remain. However, with more pressure anticipated, plaintiff representatives may pursue damage concepts that prioritise compensating plaintiffs rather than punishing wrongdoers. In Mexico, although punitive damages are available as an extension of moral damages, human rights jurisprudence has led to the development and recognition of 'damage to life plans' awards. These awards are a category separate from moral or economic damages, designed to compensate the long-term effects on the future circumstances of victims and their families. Similar models may offer an alternative route to maximising compensation for plaintiffs in the United States.

Federal pre-emption arguments may clarify the prospect of further glyphosate actions against Bayer in the United States. Actions alleging a link between glyphosate and cancers have so far failed outside the United States due to a lack of expert evidence verifying a causative link. In the United States, state-based 'failure to warn' claims and the acceptance of conflicting expert evidence has resulted in substantial damages (both general and punitive) being awarded. However, the federal Environmental Protection Agency (EPA) has consistently approved glyphosate products without a cancer-related warning. Bayer argues that states cannot impose labelling requirements in excess of federal requirements. Some states agree, with North Dakota recently legislating that warning labels meeting EPA standards will be deemed sufficient. This measure effectively shields Bayer from glyphosate cancer litigation in the state. However, with conflicting circuit judicial guidance arising on this issue, Bayer has petitioned the Supreme Court, which has in turn sought the views of the Solicitor General. Further developments are expected in 2026.

Lender policy claims are expected to rise as fixed-rate mortgage deals arranged before late 2021 begin to expire en masse by 2026. Borrowers moving to higher interest rates may struggle with repayments, leading to increased arrears and repossessions. This will likely drive more claims against lender policies, once title defects or valuation issues are revealed. Insurers should prepare for elevated notification volumes.

In the last three years we have seen consultations by the Department of Health and Social Care to introduce a bespoke fixed recoverable costs regime for lower value clinical negligence claims up to £25,000 that was to introduce wholly different ways of conducting claims (with a 'light track' and 'standard track').  That had been expected to be introduced in October 2024, and then April 2025, but nothing more has been seen. We have since had the introduction of fixed recoverable costs to civil litigation by the Ministry of Justice, which clinical negligence claims can benefit from where admissions of liability are made and where damages do not exceed £100,000. With the costs of clinical negligence rising, and with growing political interest, we may see a renewed (and possibly new) attempt at fixed recoverable costs for lower value clinical negligence claims.

Despite the lower claims numbers, claims costs will continue to rise faster than the Consumer Prices Index. Concerns regarding the integrity of electric vehicle (EV) batteries post-collision, and the need to recalibrate Advanced Driver Assistance Systems will result in increased complexity and cost, for both labour and parts. Insurers and the motor repair sector continue to highlight skills shortages for repairing EVs and cars with sophisticated safety systems post-accident.  This increases repair times and with it, costs.

Costs of care are already subject to significant inflationary pressures, not least as a result of labour shortages in the sector. Those labour shortages are likely to worsen as the government clamps down on net migration and the requirements for new entrants to the UK. Until the labour shortages are resolved it is unlikely that the inflationary pressures in the care sector will stabilise.

As collective redress becomes normalised, product liability class actions will increase in the UK and Europe, mirroring multidistrict litigation in the United States, where many of the claims allege some form of product defect or consequent illness. Claimant representatives in the UK and Europe will be closely watching developments in GLP-1 drug and ultra-processed food litigation in the United States in 2026. However, several product liability actions are already progressing here, with claimant firms announcing the commencement of an action alleging links between certain cancers and the use of talcum powders and further possible actions involving similar allegations for hair relaxing chemicals. Although the standard causation challenges will remain in these actions, other United States actions may prove more fruitful. Combat arms earplugs linked to a US$6 billion settlement in the United States are now under scrutiny across the Atlantic, with an action underway in the UK. Similarly, a cross-border representative action is underway in Italy concerning allegedly defective CPAP ventilator machines and the release of potentially harmful particles. A similar case in the United States led to a US$1.1 billion settlement in April 2024.

While the accountancy market as a whole is not expected to see seismic change, the Financial Reporting Council is in transition to a renamed and potentially augmented regulatory regime, that is if long anticipated legislation is passed under this government. The Financial Reporting Council enforcement division will be led by a new Executive Counsel, and tax advisors are awaiting further significant developments with the new budget in November. Meanwhile, all eyes will be on the anticipated judgment in NMC Health - after a dearth of case law in this area, trial in this multibillion pound claim is wrapping up and the judgment promises to shed light on numerous areas, not least tricky questions around the liability of UK firms connected to the audit of overseas subsidiaries.