Skip to main content
Marsh logo

Social Inflation and Nuclear Verdicts

Nuclear verdicts can tarnish an organisation’s reputation and significantly impact its financial well-being, underscoring the need for effective mitigation and management plans.

Contact us

Outsized jury verdicts, or “nuclear verdicts,” are a primary driver of social inflation, where the costs associated with insured claims raise at a rate that exceeds general economic inflation. Nuclear verdicts are increasing in frequency and severity, threatening organisations of all sizes, across all industries, and in a growing number of regions. The potential extensive payouts associated with these verdicts also presents a concern for insurers, who are reviewing their risk portfolios and adjusting pricing.

Although mostly prevalent in the United States, social inflation is starting to impact organisations in other countries. It is therefore important for organisations, irrespective of their location, to be aware of the potential impact of social inflation on their business and take action to mitigate their risk.

Aside from insurability challenges — including increased premium costs and inability to secure sufficient limits — nuclear verdicts can significantly impact a company’s reputation, lead to loss of customer confidence, and threaten a business’ ongoing viability.

It is critical for businesses — whether in the US or elsewhere — to take action to address the potential impact of social inflation and nuclear verdicts through effective risk management and risk transfer practices.

Related insights

The U.S. Supreme Court building at dawn in Washington, D.C., U.S. Photographer: Samuel Corum/Bloomberg

Article

Nuclear verdicts are on the rise: How can you minimise your risks?

27/09/2024
Low Angle View Of Modern Buildings In City Against Clear Sky

Article

Social inflation: Multinational companies face challenges from US operations

29/06/2023
Pen pointing to an inflation chart

Podcast

Risk in Context Podcast: Assessing and addressing the impact of social inflation

15/05/2023
Financial graph showing statistics, prices falling, stock market crash, crisis, inflation rate. Electronic chart with stock market fluctuations abstract concept.

Webcast

Impact of social inflation on business

19/01/2023
Business lawyer working about legal legislation in courtroom to help their customer

Article

Could your business survive a nuclear verdict?

01/12/2022

FAQs

The term social inflation refers to the trend of insured claims costs rising above general economic inflation. This is often due to large jury awards that exceed what might ordinarily be considered reasonable damages. Often referred to as “nuclear verdicts,” these outsized jury awards exceed US$10 million. So-called “thermonuclear verdicts,” which exceed US$100 million, are also increasing in frequency.

While outsized jury verdicts are mostly prevalent in the US, social inflation could also impact organisations in other countries. Europe and the UK, for example, have seen an increase in class actions and legislative changes while third-party litigation funding is also growing. Insurers outside the US are aware of the potential impact of these trends and may take actions to address them, potentially impacting insurance costs and availability of coverage.

While some industries tend to be at higher risk of outsized jury awards, virtually every organisation — irrespective of its size or industry — could be impacted.

The potential of high claim payouts is leading to many insurers reviewing their risk portfolios and adjusting pricing. This is often resulting in significantly higher premium costs and an inability for impacted organisations to secure sufficient limits. Further, nuclear or thermonuclear verdicts can threaten organisations’ reputation and lead to financial losses.

Employing robust risk management practices and corporate governance is essential for organisations to mitigate the risks of nuclear verdicts. It is also important to regularly review open claim inventory to identify potentially volatile claims, engage in regular and open communication with insurers and brokers, deploy early claim intervention strategies, and prepare to vigorously defend claims that cannot be settled early. Further, fostering good relationships with the community and demonstrating good corporate citizenship can help organisations reduce the risk of an outsized jury verdict.

Our team of specialists can help organisations prepare for and respond to social inflation risks in several ways, including by:

  • Conducting comprehensive risk assessments to help you identify and evaluate the potential impact of and exposure to social inflation on your organisation. 
  • Providing technical and organisational support to assist you to strategically and proactively handle claims that present the greatest risk of outsized verdicts.
  • Working with you to in evaluating and designing insurance programs that meet your needs in the context of rising litigation costs and increased jury awards.
  • Working with you in developing pre- and post-loss risk mitigation strategies, in coordination with legal and regulatory guidance from your other advisors, leveraging data and analytics, and offering industry expertise to tailor solutions to your organisation's specific challenges.

Our people

Placeholder Image

Richard Ashe

Senior Vice President, Marsh Advisory

  • United States

Chetna Gulati-Kapoor

Chetna Gulati Kapoor

Senior Claims Advocate, International Claims Solutions Division

Placeholder Image

William F Liebler

US Chief Claims Officer & Managing Director, Claims Solutions

Placeholder Image

Michael McCool

Managing Director, U.S. Chief Casualty Claims Officer

  • United States

Nicole Ng

Nicole Ng

Senior Vice President, National Claims Solutions Leader

  • Canada

Rob Powell

Rob Powell

Global Chief Claims Officer

  • United Kingdom

Talk to us

Contact us to get in touch with an industry or risk subject matter expert, learn more about a specific solution or submit a sales/RFP inquiry.

Contact us