Top 10 risk trends facing public entities

Local governments face a rapidly evolving risk landscape marked by rising litigation, regulatory change, infrastructure strain, and workforce challenges. Understanding today’s key risk trends and how to manage them is essential for leaders as they strive to safeguard communities and manage financial exposure.

Legal system abuse and the rise of nuclear verdicts are reshaping the claims environment for public entities by driving higher costs and prolonging litigation. These trends are evident in a series of recent, high‑profile cases that underscore the growing severity and financial impact of litigation facing local governments, public schools, law enforcement departments, and many other organizations.

Advanced analytics and enhanced litigation strategies — two benefits of partnering with Liberty Mutual — can help public organizations manage financial exposure.

Recent legislative and judicial trends show a clear erosion of governmental immunity and rising tort caps across multiple states,¹ significantly increasing liability exposure for public entities.

These changes, combined with narrowing qualified immunity and plaintiff strategies to bypass state protections via federal §1983 claims, create budgetary strain and drive demand for excess liability coverage.

Liberty’s expert claims team understands how to navigate this evolving environment, ensuring clients receive strategic guidance and strong advocacy when exposures shift.

Local governments are navigating a rapidly changing fiscal landscape, where political uncertainty and economic downturns challenge the delivery of core services. Yet, many communities are finding strength through collaboration and innovative problem-solving.

These collaborative approaches not only help manage immediate financial pressures but also foster long-term resilience and public trust. Liberty Mutual partners with public entities to support these efforts, offering tailored insurance solutions and cutting-edge risk management expertise.

Aging infrastructure is another growing source of exposure for local governments, as deferred maintenance increases likelihood of system failures, public safety incidents, and costly claims, driving many communities to reduce risk through proactive asset management and coordinated planning. Recent high‑profile incidents underscore these risks and illustrate how proactive infrastructure management can make the difference between crisis and community resilience.⁷

Case studies of resilience and collaboration:

Local governments are facing a structural workforce crisis that threatens their ability to deliver essential services. Despite modest improvements in recruitment since the pandemic, staffing shortages remain severe in critical areas such as public safety, infrastructure maintenance, health services, and IT.

According to the 2025 State and Local Government Workforce Survey, 71% of governments report engineering roles as hard to fill, followed by policing (66%), nursing (66%), dispatch (60%), and corrections (57%). Nearly 46% anticipate a surge in retirements within the next few years, yet 61% lack a formal succession planning process. This is a gap that could exacerbate service disruptions and institutional knowledge loss.

The consequences are tangible: Half a million vacancies nationwide have led to longer emergency response times, delayed infrastructure projects, and increased reliance on costly overtime. In cities like New York, overtime spending soared to $2 billion in 2024 — a 63% increase over three years,⁸ largely driven by staffing gaps in uniformed agencies. Budget constraints compound the problem, as many municipalities struggle to offer competitive salaries compared to the private sector, forcing them to cut services or defer maintenance projects.

For local governments, contractual risk transfer is a critical tool to manage liability exposure when working with third parties. Risks often arise in areas such as leased buildings, public use of facilities, jail medical services, and vendor agreements. Without well-structured contracts, municipalities can be left financially responsible for injuries, property damage, or professional errors caused by outside parties.

Best practices include:

By implementing these measures, local governments can safeguard public funds, maintain accountability, and strengthen partnerships while minimizing costly claims and reputational harm.

Public entities are accelerating adoption of electric vehicles to modernize fleets and manage long‑term costs, but the transition introduces new risks related to infrastructure, workforce readiness, and technology reliability.

Liberty Mutual offers support through risk management expertise and tailored insurance solutions to help governments make safe, effective transitions.

New EPA drinking water standards for PFAS require public water systems to complete monitoring and public reporting by 2027, with compliance for PFOA and PFOS levels due by 2031.⁹ This creates significant operational, financial, and reputational risk for local governments. As standards evolve, early planning, testing, and coordinated response are critical to managing compliance obligations and community expectations.

PFAS compliance is a growing source of regulatory, financial, and liability exposure — making proactive planning essential to avoid violations, costly remediation, and loss of public trust.

Rapidly evolving data privacy regulations are increasing legal, financial, and reputational risk for local governments as data volumes grow and cyber threats intensify. Liberty Mutual helps public entities navigate these complexities through its e-Risk Learning Hub, offering resources and training to strengthen compliance and reduce risk.

Supply chain disruptions remain a challenge for local governments, especially as the rapid growth of data center construction tightens demand for critical infrastructure components. Longer lead times for generators, transformers, switchgear, pipes, pumps, chemicals, and electronic parts can delay repairs and upgrades, increase costs, and heighten exposure to service interruptions. In some cases, generator waitlists now extend two years or more, creating additional strain for water utilities and healthcare-related accounts that rely on dependable backup power and resilient infrastructure.

To respond, many organizations are diversifying suppliers, building stockpiles of critical materials, and using predictive analytics to anticipate shortages. Collaborative purchasing agreements and stronger vendor partnerships can also help improve access during periods of high demand. By investing in contingency planning and supply chain visibility, local governments and essential service providers can better manage uncertainty and keep infrastructure projects on track.

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