Navigating the surge in nuclear verdicts in med mal

Huge jury awards for the victims of sexual abuse and other forms of abuse are not likely to go away any time soon – and the insurance industry, including captives and reinsurers, must find a way to cope with them until some form of solution is found. 

That was the message from a panel on the second day of the Cayman Captive Forum 2024, taking place in Cayman this week, involving Jean-Paul Rebillard, president, MedPro Specialty, MedPro Group, Liliana Forney, executive director risk finance and operations, Banner Indemnity and Megan McIntyre, senior vice president, TransRe.  

Their analysis painted a sobering picture of a liability landscape evolving at a pace that defies historical norms and threatens industry sustainability. 

The statistics shared during the panel were striking. Megan McIntyre noted that the total of the top 50 medical malpractice verdicts in 2014 amounted to $733 million. Fast forward to 2023, and this figure had ballooned to $2.45 billion. Even more alarming, McIntyre highlighted that by 2024, the sum of verdicts exceeding $1 million had already reached $4.7 billion, despite the year not yet being over. 

“This isn’t just a matter of linear growth,” McIntyre stated. “It’s an exponential rise that far exceeds any trend we could have anticipated.” 

Rebillard added that the ripple effects of such verdicts are significant, influencing not only settlements but also decisions about whether to litigate. “Behind the scenes, settlements are reshaping strategies. The sheer magnitude of these numbers is forcing a re-evaluation of trial risks and settlement thresholds,” he explained. 

The panel agreed that the term "social inflation"—a common explanation for rising liability costs—might be insufficient to describe what is occurring. As Rebillard remarked, “This isn’t a uniform lift. The pressure is concentrated at the far end of the curve, disproportionately affecting high-value claims. Low and median-value claims have been impacted, but nowhere near as dramatically.” 

This disproportionate impact is reshaping how insurers and captives operate. Liliana Forney, whose organisation has experienced nuclear verdicts, described the multifaceted challenges her team faces. 

“Our system is seeing higher self-insurance retentions, premium increases, and additional administrative demands,” Forney said. “We’ve introduced quarterly audits and increased scrutiny over reserving practices. What we once knew about claims costs and litigation risks is no longer a reliable guide. We are essentially building new predictive models from scratch.” 

Forney also highlighted the operational strain, particularly in reserving and litigation management. “Our senior leadership expects faster and more accurate analysis, often at a pace that strains existing processes,” she explained. 

McIntyre’s breakdown of the reinsurance structure underscored the interconnected challenges within the industry. Using a hypothetical $50 million tower of insurance, she illustrated how reinsurers like TransRe bear a disproportionate share of the financial burden when high-value claims arise. 

“In cases of tower-limit losses, reinsurers often pay the bulk of the losses,” McIntyre explained. “While primary insurers retain portions of their liability, reinsurers, particularly those in excess layers, absorb much of the impact. This imbalance is unsustainable.” 

Rebillard echoed this concern, pointing out that the nominal verdict-to-settlement discount rate has shifted dramatically. A decade ago, insurers might have expected to settle for roughly 25 cents on the dollar compared to verdict amounts. Today, that figure has risen to 50 cents or more. “The result is a tenfold increase in actual dollars paid,” he noted. 

The panel concluded with a discussion about how the industry can adapt. Forney emphasised the importance of collaboration across the healthcare, insurance, and reinsurance sectors. “We’re all interconnected—providers, captives, insurers, reinsurers—and, ultimately, we’re all patients. How we respond now will determine the long-term resilience of the system,” she said. 

Rebillard added that innovation and adaptability are crucial. “Traditional methods of assessing risk, setting premiums, and managing claims no longer suffice. The industry must find new ways to account for this rapidly evolving landscape,” he stated.

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