Milliman: Turn risk into resilience. A review of risk and capital hot topics for 2026

Cyber risk and new technologies. Geopolitical turmoil and climate change. Social inflation and insurance cycles. As the world faces emerging and increasingly uncertain risks, general insurers must respond.

In this article, we discuss the following Hot Topics:

• Market Landscape
• Cyber and technology
• Geopolitics
• Insurance cycles
• Social inflation
• Climate
• Emerging exposures

Delegated underwriting authorities (DUAs) and managing general agents (MGAs) continue to expand. More than half of MGAs are actively exploring acquisitions, and 40% plan to enter new territories. DUAs are expected to account for 45% of total UK market premium by 2027. Amid increased regulatory scrutiny, firms will need to show their Delegated Authority models are scalable, well-controlled and able to deliver both regulatory confidence and commercial value.

Demand for alternative risk transfer (ART) solutions continues to grow, as clients seek options for managing and transferring risk outside traditional insurance. Emerging UK legislation aims to make the region a more attractive domicile for captives and parametric solutions also are growing, particularly in regions with coverage gaps.

Although cyber risks have not abated, the cyber insurance market is softening, with rates falling by an average of 11% in 2025.

The rapid adoption of artificial intelligence (AI) has caused annual US data centre spending to rise from $1.8 billion in 2014 to $45 billion in mid-2025. In a recent Milliman survey, 57% of participants listed AI as one of their top risks in 2026. Unlike traditional property policies, the costs from business interruption often exceed physical damage, leaving many insurers hesitant to provide such large limits.

A recent Milliman survey found that 81% of respondents ranked geopolitical risk as one of their top risks.

The Iran-Israel escalation has put geopolitical risk under the spotlight, as war-risk premiums quadrupled, Strait of Hormuz cargo volumes fell abruptly. State conflict can also simultaneously drive marine hull claims, energy business interruption payouts, oil price spikes and financial market volatility. Lloyd’s of London [TC3.1]expects this greater volatility to drive demand for insurance.

In recent years, one key consideration in capital models has been understanding uncertainty around future underwriting performance. As conditions soften, Lloyd’s expects aggregate premiums to decline 1.5%, with casualty risk-adjusted rates already negative.

In November 2025, Lloyd’s stated that casualty rates appear inadequate, rapid cyber expansion may be outstripping the market’s risk capacity and property rates continue to soften. Reinsurance costs are forecast to decline up to 15% in competitive lines.

Although social inflation peaked in 2024, high levels persist and are driven by large court awards, which caused a 57% increase in US liability claim costs in the past decade. Certain jurisdictions contribute more to losses than others: 60% of nuclear verdicts—those with awards exceeding $10 million—mainly occur in California, Texas and Florida.

Third-party litigation funding (TPLF) continues to be a key contributor to social inflation. In the EU, TPLF is expected to increase from €3 billion in 2025 to €7 billion in 2032; in the US, it is expected to reach $31 billion by 2028.

In Europe, 2025 brought more extreme heat and drought, which contributed to more wildfires than in past years, as discussed in Milliman’s annual report Extreme weather in Europe. Globally, the costliest insured weather event was the California wildfires, which caused estimated losses of $4 billion.

Going forward, wildfires are likely to become more common, challenging traditional risk-mapping and underwriting methods. In the UK rising temperatures may expose more residences to flooding, continuing to drive up flood claim costs.

PFAS (otherwise known as forever chemicals) remain an emerging risk to insurers, with litigation and regulatory scrutiny increasing in the UK, EU and US. Experts anticipate an increase in PFAS-related injury and environmental claims as new regulatory timetables take effect and claimants test liability in court.

In the UK, £1.16 billion worth of fraudulent general insurance claims were identified in 2024, more than half in motor insurance. The growth of AI will only further enable fraud.

In a constantly changing world, risk [YH4.1]management strategies must consider many headwinds, including the interrelated drivers of cyber, geopolitical and climate risks. In the short term, companies will need to view these through the lens of softening market conditions and proactively navigate the cycle whilst pursuing their longer-term strategy. The emergence of new claims will test and challenge insurance leaders and create opportunities for those best prepared.

Read our key observations and the questions insurers should consider when making risk and capital management decisions. Explore the full article by Yoke Hon Hue, Consultant and Joshua Tomlin, Principal and Consulting Actuary: Milliman’s 2026 Risk & Capital Hot Topics paper.