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Cyber, climate, pandemic emerge as top issues

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Cyber, climate change and the impacts of the pandemic have globally converged as the top issues facing insurers, a Risk Radar report examining concerns in countries including Australia has found.

The report, in its third year, is produced by Global Insurance Law Connect (GILC), an alliance of legal firms including Sparke Helmore Lawyers.

“The global issues of cyber and the impact of the pandemic particularly, resonate in Australia,” Sparke Helmore Commercial Insurance Partner and GILC Asia-Pacific representative Gillian Davidson said.

“Insurers and their customers have had to be quick to respond to enable business continuity and establish a stable position in the market.”

Ms Davidson says technology advances come with the potential for a disruptive threat landscape, characterised by significant privacy and cyber risks, and as regulators step up their scrutiny insurers face greater compliance and cyber claim costs.

Business interruption cover remains contentious, with the industry recognising the importance of seeking clarity and working with stakeholders and policyholders to gain resolution as quickly as possible.

“What has transpired as a result of the pandemic will potentially cause insurers to rethink their risk appetite, underwriting principles and policy wording construction with resultant long-term impacts across the market,” Ms Davidson says.

The Risk Radar report says the blocking of the Suez Canal by ultra large container ship Ever Given has also highlighted that delay coverage for cargo owners is not generally available in the Australian marine insurance market, and there may need to be a fresh look at ways to provide cover.

Other markets examined in the report are Belgium, Brazil, China, England and Wales, Finland, France, Germany, India, Ireland, Italy, Luxembourg, Mexico, Netherlands, Northern Ireland, Norway, Scotland, Spain, Switzerland, Turkey, Taiwan and the US.

“For the first time, many of the issues that our lawyers have reported as being currently critical in their markets have converged,” GILC Chairman Jim Sherwood said. “In this environment, it is all the more important that different markets share approaches, regulatory challenges and stories of innovation.”

In the US, many insurers are seeing high levels of ransomware claims, potentially leading to coverage changes, while the report says some hackers see “bragging rights” from targeting insurers themselves.

The US Federal Government is actively involved, both as a low-enforcer and in combating foreign state-sponsored hacking programs.

“Overall, this class of insurance could find itself at the centre of a major client, regulatory and government storm in 2021 with reputational implications for insurers who read the market wrongly,” the report says.

In England and Wales, the report says that while the UK Supreme Court decided a pandemic-related business interruption test case largely in favour of policyholders, liability claims may also emerge against hospitals, care homes and employers in general where people have contracted COVID-19 in those settings, and in relation to a return to more normal working practices as restrictions ease.

For France, repercussions of climate change are described as “another sleeping giant” with major legislation being introduced this year in an attempt to address the issue.