A Shifting Liability Landscape

Product liability risks are entering a new phase of complexity. Pricing pressures remain front and center, even as segments of the market begin to moderate. Capacity continues to fluctuate, attachment points remain elevated and underwriting discipline has tightened across higher hazard general liability and excess and umbrella layers.

Recent data reflects that reality. While U.S. commercial insurance pricing trended downward throughout 2025, insureds with significant product liability exposures continue to face challenges in securing optimal placements. A 2025 industry survey shows that 86% of independent insurance agents report challenges with market access and product availability as insurance carriers adjust capacity and underwriting strategies, highlighting that access to coverage limits remains limited for many complex risks.

Beneath these conditions lies a deeper issue: escalating loss costs. Social inflation continues to drive severity, with U.S. liability claims increasing 57% over the past decade due to rising litigation and large jury verdicts. These trends are reshaping how carriers deploy capacity and how clients access coverage.

While the market shows signs of softening, the underlying cost dynamics remain unchanged. “In an environment shaped by inflation, supply chain disruption and litigation volatility, these pressures are not only influencing pricing but also reshaping how organizations think about risk ownership and financing structures,” said Seth Hollis, head of specialty general liability at The Hanover. “Borrowed capacity is only one part of the equation. Retained risk is increasingly becoming another.”

For larger, well-managed organizations, self-insured retentions (SIRs) can serve as a powerful strategic lever, improving cost control and supporting long-term program stability. This not only serves as a strong selling point for agents but also enables them to better position clients within a challenging market.

Aligning SIR Strategies to Product Liability Risk Profiles

Seth Hollis, Head of Specialty General Liability, The Hanover

Product liability presents a risk profile that often aligns well with retained risk strategies.

Many organizations experience a pattern of predictable, lower-severity claims, while more catastrophic losses remain infrequent but impactful. Traditional insurance structures tend to price toward those high-severity events, driving premium costs even when day-to-day loss activity remains manageable.

For organizations with the right financial and operational profile, this presents a risk management opportunity. “Retaining a more predictable layer of risk can improve efficiency and total cost of risk over time, particularly for companies with strong safety controls and claims oversight,” Hollis said. “These organizations typically combine financial strength with operational discipline, supported by consistent cash flow, credible claims data and a long-term view of risk financing.”

In practice, SIR strategies can take multiple forms depending on the organization’s goals and risk profile. For example, a manufacturer with more frequent, predictable claims may retain a defined layer of risk, while another manufacturer facing less frequent but more severe claims may use an SIR to manage volatility while preserving protection for catastrophic losses. Larger commercial accounts may also use SIRs to gain greater influence over claims management outcomes, using retention to more closely align financial and operational controls.

The key is intentionality. SIRs should be designed around a well-understood risk profile, not introduced as a default response to market pressure.

From a carrier perspective, SIR structures also introduce alignment. When insureds manage claims within their retention, they tend to focus on preventing losses, handling defense strategically, and resolving matters more quickly. This alignment can lead to more sustainable results across the account.

The Value Equation: Cost, Capacity and Control

SIRs are often associated with premium savings — and for good reason.

By assuming a portion of risk, insureds can reduce the amount of exposure transferred to the carrier, which typically results in lower upfront premium.

However, that shift also introduces greater financial responsibility. Losses within an SIR are funded directly by the insured and may not be subject to an aggregate cap, requiring organizations to maintain adequate reserves and be prepared to absorb multiple losses within a policy period.

For organizations equipped to manage that responsibility, the value of an SIR extends beyond immediate cost savings:

• Improved access to capacity: SIR structures can make complex product liability risks more attractive to carriers, supporting greater willingness to deploy limits.
• Enhanced program structure: Flexibility exists to tailor retention levels across different product lines within a general liability program, allowing organizations to align retained risk with their operations.
• Long-term cost stability: Reducing fixed premium costs while retaining predictable losses can lead to a more stable total cost of risk over time.
• Greater claims influence: Organizations gain more direct oversight of defense strategy, legal expenses and settlement decisions within the retention.

Amid ongoing economic uncertainty and litigation volatility, these benefits can help organizations achieve more consistent and predictable risk outcomes.

Claims Management: The Critical Differentiator

The effectiveness of an SIR program ultimately depends on claims execution.

Managing losses within a retention requires discipline, speed and coordination. “Organizations need the ability to respond quickly to incidents, engage legal resources effectively and resolve claims before costs escalate.” Hollis said. This requires dedicated internal risk management leadership or strong alignment with third-party administrators, supported by clearly defined escalation protocols for more complex claims. A consistent legal strategy, backed by experienced counsel, plays a critical role in maintaining control over outcomes, while ongoing monitoring of claim trends helps ensure that lessons learned are continuously applied.

Even above the retention, carrier expertise remains essential. It provides loss analytics, benchmarking insights and strategic guidance that support the retained layer, help protect excess policies and drive a lower total cost of risk over time.

When these elements are aligned, SIR programs can perform as intended — improving outcomes at both the primary and excess layers.

Guiding the Client Conversation

For independent insurance agents and brokers, SIRs represent an opportunity to elevate the conversation around risk management for the right clients.

The most effective discussions move from “taking on more risk” to focusing on structuring risk more strategically. This includes aligning retention levels with a client’s operational realities and financial tolerance, identifying losses that may already be absorbed indirectly through inefficiencies or premium structure, and assessing readiness to manage claims within a retention framework. SIRs can be thoughtfully positioned as a proactive strategy rather than a reactive adjustment.

There are also clear advantages for agents. SIR solutions are not widely utilized across the middle market, creating differentiation in how programs are structured. As clients grow in size and sophistication, SIRs offer a pathway to evolve coverage without displacing existing relationships.

“This evolution supports long-term partnerships, allowing agents to guide clients from more traditional risk transfer agreements into increasingly sophisticated risk financing strategies over time.” Hollis said.

The Importance of Carrier Partnership

Carrier selection becomes especially important in SIR programs.

Not all insurance carriers are equipped to support retained risk structures, particularly in complex product liability environments. Even among those that can, many limit loss-sensitive program offerings to national account clients, where qualifications often depend on workers’ compensation being structured on a loss-sensitive basis. “The most effective partners bring a combination of specialized underwriting expertise in product liability and dedicated claims resources that extend beyond traditional coverage,” Hollis said. “They also provide loss control and risk solutions that help insureds better manage exposures within the retention.”

Some carriers, like The Hanover, have dedicated complex general liability teams that can offer SIR structures on general liability programs for a range of customers. They can also maintain guaranteed cost structures for other lines, allowing clients to take on risk selectively where it aligns with their strategy. These capabilities enable more tailored program design as client needs evolve.

In complex liability segments, specialization matters. Precision in underwriting, claims and risk advisory support can significantly influence outcomes across the entire insurance program.

A Strategic Path Forward

Self-insured retentions are not a universal solution, but in today’s product liability landscape, they are increasingly relevant. Market dynamics will continue to evolve, while underlying loss trends — driven by litigation costs and severity — remain persistent. Organizations that take a deliberate approach to retained risk today are better positioned to navigate the market cycles of tomorrow.

For qualified insureds, SIRs can improve access to coverage, stabilize costs and introduce greater control over claims outcomes. For agents and brokers, this presents an opportunity to grow alongside clients by delivering more value-added strategic advice and placing business more effectively in challenging markets. Partnering with carriers like The Hanover that have the expertise and flexibility to support retained risk structures is critical. Together, these relationships help build insurance programs that are more resilient and better meet customer needs.

To learn more, please visit: https://www.hanover.com/