Social Inflation — social inflation is the latest buzzword given to the phenomenon of unexpected
rising insurance claim costs because of societal trends and views toward
litigation. While social inflation as a concept is not new, it recently has
become very popular in the insurance press and now appears frequently in the
general press. Nearly every insurance company CEO is talking about social
inflation and how claims costs are increasing in ways that were not
anticipated. Social inflation is similar to any emerging risk, except that
social inflation is not an actual risk but a driver of the increased costs to
address risks. Like emerging risks, the effects of social inflation may skew
reinsurance contracts by significantly altering the economic underpinnings of
the reinsurance contract from when originally written.