Lockton’s May 8 casualty adverse development analysis quantifies where the industry’s reserve miss is concentrated: accident years 2021 through 2023. Commercial auto posted $1.8 billion in adverse development for calendar year 2025, with nearly $1.6 billion from accident years 2022 and 2023 alone. The broader other liability occurrence (OLO) line added $7.3 billion, more than half ($3.9 billion) from those same recent vintages.
The pattern is consistent across both lines. Initial loss picks for accident years written during and just after the pandemic underestimated how much social inflation, litigation funding, and nuclear verdict severity would compound through the development period. The industry continues to revise those years upward.
Who It Affects
Self-insured employers retaining commercial auto liability (trucking fleets, delivery operations, transit authorities, municipalities with vehicle fleets) and any organization holding GL or umbrella risk on its own balance sheet for policy years 2021 through 2023. If the broader market’s development factors for those years are too low, the same estimation risk applies to your retained layer.
Captive owners writing auto or GL in a single-parent or group structure face the same exposure: the selected link ratios driving IBNR for those accident years may not yet reflect the severity environment that has emerged since 2021.
The Reserve Mechanism
The core problem is development factor adequacy for specific accident years. When $1.6 billion of $1.8 billion in commercial auto adverse development concentrates in just two accident years, the signal is that selected age-to-age factors for the 24-to-36 and 36-to-48 month intervals underestimated how far those claims still had to run.
For self-insured programs, this manifests as actual paid and incurred emergence outpacing the projections from your last reserve study. If your actuary selected development factors based on historical patterns that predate the post-2020 severity shift, the implied ultimates for AY 2021 through 2023 may be understated.
CNA’s Q1 2026 earnings independently confirm the pattern. The carrier posted 4.0 points of adverse development in its commercial segment, driven by excess casualty reserve strengthening. Its combined ratio deteriorated to 102.2% from 98.4% a year earlier.
Lockton also flagged a secondary concern: soft-market accident years 2016 through 2019 contributed another $1.8 billion in OLO adverse development, a reminder that older vintages written at inadequate pricing continue to develop adversely well past the point where they appear “mature.”
What This Means for Your Next Review
Before your next reserve study or interim monitoring meeting, ask your actuary to isolate accident years 2021 through 2023 in both the paid and reported triangles and compare actual emergence against the projected development from the prior study. If incurred development is running ahead of projections by more than a few percentage points, the selected factors need revision. A Berquist-Sherman adjustment can test whether case reserve strengthening during this period is masking the true underlying development rate. For commercial auto specifically, confirm that the severity trend assumption reflects the litigation funding and nuclear verdict environment that has prevailed since 2021, not the pre-pandemic baseline.