1. The Growing Cost of Litigation: Social Inflation Hits New Highs
Social inflation—the rising cost of claims driven by broader liability definitions, larger jury awards, and more litigation—is reaching a critical point. Record-setting "nuclear" ($10M+) and even "thermonuclear" ($100M+) verdicts are being fueled by public sentiment that large companies can absorb high damage awards.
Litigation funding (where third parties finance lawsuits in exchange for a cut of the recovery) is accelerating this trend, especially in commercial auto liability and general liability claims. We're also seeing higher defense costs and new plaintiff-friendly laws tilt the scale further.
Koru's Advice:
- Revisit your liability limits—do they reflect today's verdict environment?
- Reinforce safety and employee training programs to lower risk.
- Explore alternative risk financing structures like captives or high-deductible programs to control costs and defense strategies.
2. Artificial Intelligence: Innovation Meets Liability
AI is transforming how businesses operate—from automating workflows to accelerating decision-making. But the legal risks are catching up fast. More than 200 lawsuits have emerged, ranging from IP and privacy violations to discrimination and deceptive practices. At the same time, cybercriminals are weaponizing AI to create more sophisticated phishing attacks and deepfakes.
Despite the surge in usage, many cyber policies still don't explicitly address AI risks. In 2025, we expect to see more insurers either excluding or affirmatively covering AI exposures.
Koru's Advice:
- Conduct an AI risk assessment and integrate it into your broader risk management strategy.
- Stay informed about new state and federal regulations around AI.
- Discuss with your broker whether your cyber, E&O, and general liability policies respond to AI-related claims.
3. Supply Chain Headaches Continue
Supply chain volatility—driven by natural disasters, cyberattacks, recalls, port shutdowns, and theft—is still a major concern for 2025. Inflationary pressures and cargo theft (especially high-demand items like electronics and food) are only adding fuel to the fire.
These challenges often lead to delays, liability disputes, and an uptick in business interruption claims. Some insurers are tightening terms or increasing premiums as a result.
Koru's Advice:
- Evaluate your business interruption and contingent business interruption coverage.
- Map your critical suppliers and diversify where possible.
- Explore supply chain risk management tools like GPS tracking and predictive analytics.
4. Evolving Catastrophe (CAT) Risk: Not Just Hurricanes Anymore
While hurricanes remain headline events, secondary perils like wildfire, hail, flood, and convective storms are taking a larger toll. The recent California wildfires are expected to become the state's costliest in history.
Carriers are scrutinizing high-risk portfolios more than ever, and pricing reflects increased claims frequency and higher rebuild costs due to labor and material inflation. Underwriting focus is shifting to valuation accuracy, risk aggregation, and climate exposure.
Koru's Advice:
- Make sure your property values are updated and reflect today's replacement cost.
- Lock in multi-year rates where available.
- Consider tools like parametric insurance or captives to manage property risk creatively.
5. Geopolitical Volatility and Global Elections
With over 70 countries holding elections in 2024, political risk is back in the spotlight. Conflict, civil unrest, and regulatory change are making certain regions riskier to operate in.
From supply chain disruptions to increased premiums for political violence and terrorism coverage, the ripple effects of geopolitical instability are already reaching commercial insurance markets.
Koru's Advice:
- Review your international exposures and how they’re insured.
- Monitor political developments in key markets.
- Consider political risk insurance or trade credit products if you operate globally.
