The article examines the impact of inflationary spikes in the early 2020s on the adequacy of actuarial reserves in the property and casualty (P&C) segment, identifying the drivers of systematic delays in adjusting these reserves. The relevance of the study is determined by the fact that loss reserves constitute the core of an insurer’s financial resilience. At the same time, the structural break in inflation trends from 2021 to 2024 disrupted the baseline stationarity premise upon which classical reserving methodologies implicitly rest. The objective is to provide an integrated assessment of how macro-inflationary shocks transmit into claim severity and generate the phenomenon of inflation recognition lag, as well as to compare the sensitivity of traditional approaches (Chain Ladder, Bornhuetter–Ferguson) to the new inflation regime. Scientific novelty lies in integrating a macro-level analysis of CPI and industry-specific inflation drivers with a micro-level examination of Allstate’s public reporting (10-K) and a quantitative assessment of the temporal lag in reserve responses to inflation. It is shown that parameter inertia in Chain Ladder and the anchoring of  Bornhuetter–Ferguson to a priori expectations create an under-reserving risk in accident years, followed by sharp reserve strengthening; in the Allstate case, the 2021 inflation impulse was fully reflected in reserves only in 2022 (strengthening on the order of $1.7 bn). Additionally, it is substantiated that the decisive role is played not by the headline CPI, but by the insurer-specific inflation basket (including repairs, parts, and medical care) and the multiplicative overlay of social inflation, which amplifies pressure in long-tail liability lines. The article may be helpful for actuaries, risk managers, and financial executives of P&C insurers developing robust reserving procedures under non-stationary inflation.

reserve adequacy, actuarial models, inflation recognition lag, Chain Ladder method, social inflation, Allstate, consumer price index, stochastic reserving

Blanchard, O., & Bernanke, B. (2024). An Analysis of Pandemic-Era Inflation in 11 Economies. NBER Working Paper, 32532. https://doi.org/10.3386/w32532

BLS. (2022, July 18). Consumer prices up 9.1 percent over the year ended June 2022, the largest increase in 40 years. U.S. Bureau of Labor Statistics. https://www.bls.gov/opub/ted/2022/consumer-prices-up-9-1-percent-over-the-year-ended-june-2022-largest-increase-in-40-years.htm

Bostjancic, K. (2025). The insurance sector is navigating a significant price-risk adjustment. Business Economics, 60, 34–43. https://doi.org/10.1057/s11369-025-00387-5

Cai, P., Abdallah, A., & Jeganathan, P. (2024). Recurrent Neural Networks for Multivariate Loss Reserving and Risk Capital Analysis. ArXiv. https://doi.org/10.48550/arxiv.2402.10421

De Felice, M., & Moriconi, F. (2023). Stochastic Chain-Ladder Reserving with Modeled General Inflation. Risks, 11(12), 221. https://doi.org/10.3390/risks11120221

Jacobs, T., & Leone, T. (2023). Progressive boosts H1 reserves on pressure from auto claims, Fla. losses. S&P Global. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2023/9/progressive-boosts-h1-reserves-on-pressure-from-auto-claims-fla-losses-77560401

Léonard, M., & Conlon, R. (2023). Inflation and Insurance Replacement Costs. International Insurance Society. https://www.internationalinsurance.org/sites/default/files/2023-05/Inflation%20and%20Insurance%20Replacement%20Costs%205.2023_1.pdf

Maulidiah, S., Alfajriyah, A. U., & Ahmad, I. S. (2025). Comparison of BDCL and Bootstrapping Bornhuetter Ferguson Methods in Claim Reserve Estimation (Case Study at Actuarial Consulting Firm X). Jurnal Matematika, Statistika Dan Komputasi, 21(3), 708–724. https://doi.org/10.20956/j.v21i3.43102

SA Transcripts. (2023, February 2). The Allstate Corporation Q4 2022 Earnings Call Transcript. Seeking Alpha. https://seekingalpha.com/article/4574700-the-allstate-corporation-all-q4-2022-earnings-call-transcript

Sclafane, S. (2024). GEICO’s Eye-Popping 2023 Insurance Profits, Falling Employee Counts. Carrier Management. https://www.carriermanagement.com/news/2024/02/25/259036.htm

SEC. (2021). Allstate Form 10-K Disclosures. SEC. https://www.sec.gov/Archives/edgar/data/899051/000089905122000015/all-20211231.htm?

SEC. (2022). Allstate Form 10-K Disclosures. SEC. https://www.sec.gov/Archives/edgar/data/899051/000089905123000020/all-20221231.htm?

SEC. (2023). Allstate Form 10-K Disclosures. SEC. https://www.sec.gov/Archives/edgar/data/899051/000089905124000013/all-20231231.htm?

SEC. (2024). Allstate Form 10-K Disclosures. SEC. https://www.sec.gov/Archives/edgar/data/899051/000089905125000015/all-20241231.htm?

Su, C. W., Dong, R., & Qin, M. (2025). Do geopolitical risks impede the global supply chain? Finance Research Letters, 85(A), 107811. https://doi.org/10.1016/j.frl.2025.107811

Swiss Re. (2024, September 7). sigma 04/2024: litigation costs drive claims inflation. Swiss Re. https://www.swissre.com/institute/research/sigma-research/sigma-2024-04-social-inflation.html

Vanegas, S. C., Badescu, A. L., & Lin, X. S. (2024). Claim reserving via inverse probability weighting: a micro-level Chain-Ladder method. European Actuarial Journal, 15(1), 89–135. https://doi.org/10.1007/s13385-024-00395-3