Swiss Re: Non-Economic Factors Drive Half of UK Liability Claims Growth

Non-economic factors have accounted for roughly half of liability claims growth in the U.K. in the last six years, according to a new report.

The report from Swiss Re Institute, High U.K. Liability Claims Growth Could Increase Without Balanced Reforms, shows non-economic factors added 5 to 6 percentage points to liability claims growth in 2024. That’s the fifth straight year of elevated liability excess inflation.

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Non-economic drivers include changes in laws and legal procedures, litigation funding and claimant behavior.

The U.K. has experienced faster growth in liability excess inflation than some other European markets.

The report also identifies several pending legal and regulatory reforms that could further increase liability claims costs, including the U.K.’s planned reversal of a 2023 court ruling, R (PACCAR Inc) v. Competition Appeal Tribunal, which made certain litigation funding agreements unenforceable. The government committed to reversing the ruling through legislation, and the authors of the report expect litigation activity to increase if the ruling is reversed.

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Another proposed change involves expanding collective legal actions beyond competition law. A review of consumer class action rules is considering whether to allow claimants to be automatically included in lawsuits unless they opt out, which the report’s authors say could increase the number of claimants and make litigation funding more financially attractive.

The report also cites an economic analysis estimating that litigation funded by third parties and involving collective redress could generate £11.9 billion ($15.7 billion) in costs and compensation for U.K. businesses.

The report identifies litigation funding transparency, claimant control over settlement decisions and alternative dispute resolution as potential safeguards against further claims inflation.

The institute’s analysis uses a liability excess inflation index covering domestically located U.K. risks.