(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.

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.

Tariffs imposed by President Trump are expected to begin impacting consumers more directly, with economists predicting an uptick in inflation in the United States. 7.4 million Americans are currently unemployed (a rate of 4.3%) but job growth has slowed with only 22,000 new jobs reported in August 2025. The financial assistance that helps people afford health insurance under the Affordable Care Act is set to expire at the end of 2025 and was a key sticking point in the fraught budget debates that led to the shutdown of US government agencies in October. Without an agreement to extend these provisions, up to 17 million Americans could lose their health insurance. Meanwhile, corporations are expected to benefit from new tax breaks after the passage of the One Big Beautiful Bill Act (yes, that's its official name). We expect these developments will incite anti-corporate sentiment in the United States, which is one of the hallmarks of social inflation that contributes to the proliferation of nuclear and thermonuclear verdicts. Consequently, we predict companies will more frequently seek to avoid United States juries and compel arbitration wherever possible based upon the terms that accompany their products and services.

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.

Foreign insurers will look more favourably on risks in Argentina as the country emerges from a period of sustained recession and hyper-inflation. The government of President Javier Milei has brought the monthly inflation rate down from its December 2023 peak of 25.5% to 1.9% in August 2025, although this still translates to an annual rate of over 33%. The government has been working to attract direct foreign investment and has offered subsidies for the important agricultural sector to raise the level of insurance. Whether this will be enough to encourage insurers back into the market remains to be seen.

Global tariffs, sanctions, energy insecurity, high inflation and supply-chain disruption have created the most challenging trading and economic conditions for many decades. Our interconnected world means company directors need to be aware of the different geopolitical forces at play, and how critical they are to corporate decision-making. Investment and growth strategy, employment, and legal and regulatory compliance are all potentially impacted. Diversity in the composition of the board will broaden knowledge and understanding on how best to guide companies through these economic and geopolitical uncertainties. Investment in renewable energies, AI and innovation may create silver-lining opportunities, as well as enhance corporate strength and resilience in an ever-changing world.

The cost of settling property damage claims is rising, driven by escalating reinstatement costs and limited access to affordable alternative accommodation. Inflation has pushed up the price of building materials and skilled labour, while the effect of United States tariffs on global supply chains has added an additional layer of uncertainty to build costs in the UK. A chronic housing shortage due to planning restraints, demographic pressures and speculation around property tax reforms, has driven up rents and made temporary housing harder to secure. Together, these factors are expected to keep property damage claim costs on an upward trajectory.

It is anticipated that the Irish government will seek to legislate for a scale of party-party legal costs (where the unsuccessful party is ordered to pay the costs of the successful litigant) in 2026. The government's refreshed Action Plan on Insurance Reform contains priorities aimed at lowering insurance premiums, with legal costs inflation high on the agenda. The Action Plan specifically calls for the development of new guidelines to set clear levels of legal fees for personal injury litigation, with the aim of promoting transparency and fairness in legal costs. We expect that initial proposals to achieve this will be introduced by Dail Éireann in 2026, and will be hotly contested by the Law Society of Ireland, the office of the Legal Costs Adjudicator and the Bar Council.

The challenges of insuring major, often international, sporting and entertainment events are multi-faceted, and the insured values eye-watering. Inflation has impacted ticket prices, travel and accommodation costs and is likely to continue to drive such values upwards. Contingency underwriters need to assess an increasingly complex set of interconnected risks, including security, weather, geopolitics, cyber and logistics. The market has responded to these challenges with increasingly integrated risk assessment procedures, more comprehensive policies and more sophisticated pricing models. As we look forward to mega events such as the 2026 FIFA World Cup and the 2026 Winter Olympics, contingency insurers will need to continue to leverage data and analytics, and to work with third party security, environmental and other specialists, to ensure they have the granular detail necessary to write these risks sustainably.

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.

Colombian authorities are working to align national regulations more closely with international standards. Last year, new rules were introduced covering risk-based standards and reserving with tighter rules on solvency and transparency. Work is now being undertaken to incorporate IFRS17 accounting standards into the national regulatory regime. The government hopes this will open up the market, although it comes against a background of high inflation, currency devaluation, rising medical and motor repair costs, all putting pressure on insurer margins.

The M&A market is expected to be driven by strategic growth, especially in sectors like tech, healthcare, and renewables. However, stricter regulatory environments (especially in the European Union and United States) as well as ongoing economic concerns, such as geopolitical tensions and inflation, may slow down deal processes and add complexity to transactions. As M&A deals become more complex, the demand for warranty and indemnity (W&I) insurance will increase. Increased deal volume and risk perception could lead to higher premiums and stricter terms for W&I insurance.