Inflation, litigation, and talent concerns are three major drivers of the specialty-lines trends the Argo Group explores in a recent report.
Labor inflation is outpacing material costs, with U.S. labor costs rising 1.42 percent year over year, compared to 0.93 percent for materials, Argo reported. This surge in labor costs affects both claims payouts and policy pricing.
“For brokers,” Argo says, “that means underpriced risks are more vulnerable than ever.”
This trend underscores the need for actuarial precision and disciplined underwriting. Long-term profitability now hinges on the ability to anticipate inflationary impacts and adjust rates proactively.
In the construction space, tariff-driven material cost spikes make claims more costly. Workers’ compensation – while still profitable – is feeling the bite of medical inflation.
Legal volatility is another growing concern. The Argo report cited a surge in “nuclear verdicts” — outsized jury awards that exceed actual damages – whose unpredictability makes risk pricing more complex and forces insurers to invest more heavily in legal expertise and claims discipline.
Stephen Perrella, Argo’s chief claims officer and a former trial lawyer, said, “In law school, you learn that our justice system is designed to make a plaintiff whole – no more, no less. But today…in many jurisdictions, verdicts far exceed actual damages.”
Perella pointed to states like Georgia and Florida, where outsized verdicts and systemic inefficiencies have triggered tort reform only after insurers began pulling out of the market.
“The problem is we’re implementing tort reform once those abuses have begun to overwhelm a just system,” he said.
For specialty insurers, talent constraints remain an operational risk.
“With large portions of the workforce retiring and a limited pipeline of experienced underwriters, claims professionals, and actuaries entering the field, competition for expertise is intense,” the report says. “That pressure is especially acute for carriers navigating complex risks and high-touch broker relationships.”
That means hiring the right people is only part of the solution. Argo emphasizes the need to build teams that work seamlessly together and develop talent that is ready for whatever comes next.