Having retired after 40 years in the Lloyd’s Market in January this year, I am pleased to say that I am working alongside Paradigm to take a closer look at some of the forces reshaping the market, particularly those influencing the cost and volatility of catastrophic workers’ compensation claims. This insights letter is a joint look at some of the evolving issues appearing in the marketplace today.

Over the years, I’ve had the opportunity to get to know Paradigm and develop a clearer understanding of the distinct role the organization plays in the workers’ compensation ecosystem. Partnering with workers’ compensation payers, third-party administrators, and brokers, Paradigm actively manages the most complex and costly workplace injuries that drive severity at the tail of the loss distribution. This focus gives them visibility into more than 900 catastrophic cases each year and provides insight into large‑loss dynamics that are not typically achievable within individual company datasets. In partnership with Paradigm, this periodic communication is intended to share those insights, and to provide you with a better view of the industry overall.

This edition examines two structural trends driving workers’ compensation severity that have direct relevance for excess workers’ compensation and reinsurance stakeholders—rapidly rising medical inflation and increased survivability in catastrophic claims.

Medical inflation and its implications for excess workers’ compensation and reinsurance
Medical inflation has always been a feature of workers’ compensation, but for much of the past decade, its industry-wide impact was somewhat controlled by fee schedules, utilization controls, and stable treatment patterns. That balance is shifting.

In reviewing both broader market indicators and Paradigm’s catastrophic claims data, it’s clear that inflationary pressure has re‑emerged as a material issue, particularly at the severe end of the loss distribution. The Workers Compensation Research Institute (WCRI) shared that workers’ compensation medical costs increased between 5% and 12% in 2025.¹  Meanwhile, employers are anticipating healthcare cost increases approaching 9% in 2026,² foreshadowing an increase in workers’ compensation expenses.

The chart below illustrates the growth in average medical costs that Paradigm incurred for each of their catastrophic Outcome Plan contracts when normalized to a baseline.

The medical aspect of the catastrophic claims in this graph reflects some of the toughest and most costly claim types that carriers and reinsurers fear the most, such as spinal cord injuries, brain injuries, severe burns, amputations, and multiple trauma. The minimum medical claim values applicable to this graph are $150,000. Rising medical inflation is clearly a concern that the industry needs to closely watch and manage where possible.

What stands out is where this inflation is taking hold. Sustained increases are being driven by specialty pharmaceuticals, more complex surgical interventions, higher facility charges, rising labor costs for skilled facility and home‑based care, and increased survivability (more on that below). These pressures are compounded by broader frictional factors—comorbidities, delayed or disputed medical decision‑making, and constraints on home health availability—that disproportionately affect long-duration, high‑acuity claims. The result is medical inflation outpacing general inflation across many jurisdictions, especially for catastrophic claims.

For excess workers’ compensation writers and the London reinsurance market, the implications are clear. Elevated medical inflation is driving the value of large-loss claims (medical and indemnity combined) and is contributing to higher projected ultimate claims costs, and by definition, greater impact on reinsurance structure.

While not all cost escalation is avoidable, outcomes vary widely based on early intervention, clinical appropriateness, and the quality of partners managing care. In an inflationary environment, the distinction between controllable and uncontrollable severity is becoming increasingly important when considering ultimate loss values, reserve adequacy, and long‑term loss performance.

Survivability: Extending the severity curve
A further structural cost driver, underrecognized and insufficiently planned for by workers’ compensation payers, is the continued improvement in survivability following a catastrophic injury. Advances in emergency response, trauma medicine, surgical care, and long‑term rehabilitation mean that injuries once considered fatal are now survivable, with injured workers living longer and often requiring lifelong, medically complex care. This represents an unequivocal human achievement, but it also introduces a very real and growing financial dimension to workers’ compensation claims.

Paradigm’s experience confirms this shift is materially extending the severity curve. Improved outcomes from multidisciplinary care teams, innovations in burn and spinal injury treatment, specialty pharmaceuticals, and technology‑enabled monitoring are allowing injured workers to survive—and live well—far beyond historical expectations. These advances also increase the duration and intensity of care, exposing claims to compounding medical inflation over decades rather than years. In many cases, fatalities are occurring later in the claim lifecycle, or not at all, converting what would once have been single‑event losses into long‑tail exposures with multi‑million‑dollar ultimate values.

For excess workers’ compensation and reinsurance stakeholders, increased survivability has structural implications. It heightens uncertainty around ultimate severity, challenges historical assumptions embedded in pricing and attachment points, and increases sensitivity to early clinical and strategic decision-making. When survivability is combined with elevated medical inflation, the result is a non‑linear escalation of tail risk, increasing ultimate claim values and posing challenges to higher per-person exposed reinsurance layers more frequently.

As medical inflation and survivability continue to evolve, their combined impact will remain central to loss performance for both primary carriers and their reinsurance partners. We look forward to continuing this dialogue and sharing further market observations in future editions.

About guest contributor Andrew Winyard
Andrew Winyard retired in January 2026 from Atrium Syndicate in Lloyd’s after 40 years in the London Market.  He was a well-known participant in the U.S. Workers Compensation and Casualty reinsurance sector, leading Atrium’s U.S. casualty reinsurance team for 25 years. During his time at Atrium, Andrew served as Executive Director for 11 years and also was the ceded reinsurance buyer for all lines of business for the syndicate for the past 27 years. He is a recognized thought leader and regular panelist at industry conferences.

Sources
1 Workers Compensation Research Institute (WCRI) CompScope^TM Medical Benchmarks, 2025 Edition

2 Business Group on Health’s 2026 Employer Health Care Strategy Survey