Evercore Reports Rising Social Inflation Pressuring U.S. Casualty Reserves

Evercore ISI reports persistent pressure on casualty reserves in the U.S. property & casualty (P&C) insurance sector, with notable volatility in liability lines among major insurers like CB, Berkshire, and CINF. The report underscores a significant increase in social inflation, driven by rising median court awards in liability cases, which have surged 23% in 2025 to a median of $4.9 million, more than doubling since 2019. This growth in awards reflects an evolving baseline of social inflation beyond general economic inflation, with social inflation itself estimated to drive six percentage points of annual award increases, compared to one percentage point from economic inflation. While average award values dropped 19% in 2025, they remain substantially above 2019 levels, influenced by extreme verdicts. The analysis indicates a shift in settlement dynamics, with fewer settlements but higher average settlement amounts—a strategy adopted by insurers such as AIG and HIG to mitigate exposure to large verdict risks. Despite these elevated loss trends, some signs of casualty rate moderation are emerging, as reflected in surveys and quarterly results from carriers like CB and HIG, suggesting an industry adjustment to persistent loss cost pressures. However, rate trends remain mixed, with some market data indicating continued rate increases or stability in casualty lines, which might help offset softening in property insurance rates. Evercore's findings highlight ongoing reserve volatility and emphasize the importance of disciplined casualty pricing strategies amid social inflation and loss cost challenges. The report also comments on broker pricing assumptions, noting a divergence from insurer experience, and maintains a favorable view of AON based on operational considerations.