European liability dynamics: The rise of mass litigation and social inflation

Deglobalisation has been a defining trend in the first half of 2025. Indeed, we’ve witnessed a clear shift away from integration and interconnected markets as protectionist ideals and policies take hold.  

For Europe, the impacts of this shift in the geopolitical landscape have been significant. Beyond financial market volatility, regional economic policy uncertainty is far above historic levels, while survey-based composite indicators from the OECD show that consumer confidence has plummeted since early 2025.

For the European insurance industry, such market dynamics require proactive attention. Current economic uncertainty could shape consumer perceptions of continual price increases, perceived inequality and economic misery, which may contribute to a more litigious environment.

While social inflation has long been prominent in the US claims environment, its impact in European markets has so far been limited. Data from key jurisdictions such as Germany show little evidence of social inflation in claims data to date. Yet that isn’t to say that this won’t change in the future. Australia experienced a spike in social inflation in 2022, and there’s little to assume that Europe would be immune to a similar experience.

European insurers must remain vigilant of shifting policies, sentiment and indicators, such as the EU’s Representative Actions Directive (RAD). Having been passed in 2020, it required all member states to establish legal frameworks for collective actions by June 2023. As at July 2025, all but 3 of the Member States have transposed the legislation.  

Beyond RAD, other collective redress mechanisms remain in use across many European jurisdictions, with these increasingly being targeted and leveraged by transnational legal networks such as the Global Justice Network (GJN).  

A particularly noteworthy case is GJN’s promotion of a collective action against tech firm Phillips on behalf of all European and UK users that had been affected by alleged defects in continuous positive airway pressure (CPAP) respirators and mechanical ventilators. If accepted as a legitimate collective product liability action, it would mark a watershed moment in European litigation. It is currently difficult to see how this works in an opt-in system, as Italy uses, and it remains to be seen how the Italian Court will view this case.   

This is just one example of associations of lawyers driving up litigation through coordinated efforts, with many seeking favourable jurisdictions in which to launch high-profile collective actions. Notably, European courts have accepted cases involving alleged harms well beyond the continent of late. In the Netherlands, for example, Repsol is being sued over an oil spill in Peru. In the UK, Dyson is facing a claim regarding labour conditions in Malaysia within its supply chain. 

Efforts such as these are driving up class action claims across Europe.

It is worth noting that unlike the US, jury trials in civil liability cases and widespread punitive damages are not prevalent in the Europe. However, the introduction of reforms such as RAD and the upcoming Product Liability Directive (PLD) that is set to come into effect in 2026 are undoubtedly broadening the scope of liability in Europe. Corporations in Europe need to be aware of the new PLD and its requirement for advanced disclosure. Should disclosure not be given, a product will be deemed defective. This is a major change, particularly for Continental corporations, who are unused to providing disclosure.

In addition to emerging legal reforms and the growing coordination of lawyers, the expansion of third-party litigation funding (TPLF) is another development that could continue to drive up the frequency and severity of class actions in Europe.  

According to the European Commission Mapping study published in March 2025, there are close to 300 entities currently involved in litigation funding in the EU. In Europe alone, current investment levels in TPLF exceed €3 billion, with this expected to rise to €7 billion by 2032. 

The issue is not the existence of litigation funding. Such finances can help to improve access to justice for consumers, which is undoubtedly important. However, concerns revolve around consumer protection and transparency. 

In most Member States there is no requirement for TPLF disclosure in many jurisdictions. As a result, scenarios can emerge in which defendants are unaware of who is financing a claim against them, opening the door for potential abuse. Companies may use litigation as a tool to disrupt a competitor, extract sensitive information on competitor products and, in the worst case, the funder may be a money launderer  

Additionally, conflicts of interest can arise between litigation funders and claimants.  Funder may wish for a quick return, claimants may wish their day in Court.  There is concern around funder control of litigation in terms of settlement strategy or even withdrawal of funding.  In one famous example, the high-profile case of Mr Bates vs The Post Office in the UK, while the total amount of compensation awarded was c.£58 million, the plaintiffs ultimately received only £12 million after legal and funding costs were deducted.  

Regulatory responses designed to address these issues are beginning to emerge. In June 2025, the UK Civil Justice Council published a comprehensive report on TPLF, in which it recommended the need for more stringent regulation. Crucially, it called for greater transparency, as well as the need for mandatory legal advice to be provided to claimants entering into funding agreements.  

However, while some jurisdictions are moving towards these reforms and despite the EU Commission having found evidence of close to 300 entities active in the TPLF space, there is currently no harmonised regulatory framework for TPLF in the EU.

For the insurance industry, the combination of economic uncertainty, the potential for a rise in social inflation, the coordinated efforts of lawyers in targeting favourable jurisdictions, legal reforms such as RAD and PLD, and the rise of litigation funding cannot be ignored. Indeed, these intertwined dynamics should necessitate adjustments in underwriting and claims management strategies. 

Building awareness and understanding is key. At Swiss Re, we’re actively surveying European consumers to ascertain any shifts in behaviour or increases in the propensity to sue. Legal, economic and social indicators such as these should be actively monitored, while coordination with US-based teams can help in applying learnings in relation to both social inflation and mass litigation.  

Additionally, exposure assessments should become more granular. Lines of business such as commercial motor and general liability will likely see the most significant implications, while financial lines and other sectors beyond casualty such as marine and aviation may also be affected. Similarly, company size will be relevant, with larger corporates likely to bear the brunt of any growth in litigation and social inflation.  

Through these assessments, insurers can make informed decisions to optimise and diversify their portfolios across industries and geographies, while also potentially adapt costings to account for exposures. 

Policy wordings must also be a priority in accordance with legal changes. With the PLD set to redefine what constitutes a product and open new avenues of liability (such as software-related harm), clear wordings, appropriate deductibles and carefully considered sublimits will become ever-more crucial.  

Cross-functional collaboration between underwriting and claims teams has perhaps never been more important. Indeed, insurers must ensure that their claims teams are equipped to handle cases with the potential for social inflation effectively.  

For further insight into legal developments regarding collective action, and the growth in unregulated commercial litigation funding across Europe, watch our webinar here: