Rising group of mega-trends dominates risk radar
Climate change, class actions and increased regulation are the three top issues on the risk radar in Australia, an annual report from Global Insurance Law Connect finds.
The fourth Risk Radar report provides insights from law firms in 23 countries on issues that will impact insurers, with Australian commentary contributed by Sparke Helmore and Duncan Cotterill providing information for the first time on New Zealand.
Top issues in New Zealand are new legislation governing insurance contracts, directors’ and officers’ (D&O) insurance in the covid environment and the response to trade and supply problems.
“What is striking is that in the last few years, and during the covid pandemic especially, we have seen the concurrent rise of a group of mega-trends, which impact almost every market, and provide a global challenge to us all,” Global Insurance Law Connect board member Gillian Davidson says.
The rise of digitalisation and cyber risk, increased climate risk, and regulatory change are common themes while D&O insurance issues are also highlighted.
“Coming out of the pandemic, many are also concerned about the implications for the D&O market as management decisions are put under the spotlight,” Ms Davidson said.
Australia last year saw the introduction of the new insurance code of practice and multiple regulatory reforms, some which took effect from late in the year.
This year “promises a plethora of new reforms” including the updated insurance brokers code of practice, effective in November, a prudential guide on climate change financial risks and a prudential standard on remuneration practices, effective from next January.
New financial contingency planning and resolution planning standards for insurers are also under consideration.
Climate change is a focus following bushfires and flooding and with natural disasters estimated to cost the local economy $38 billion a year.
“The global issues of climate change and sweeping regulatory reforms particularly resonate in Australia, while we have seen limited traction in our market from global insurance trends such as M&A activity, disruptor insurtechs and the social inflation phenomenon,” Sparke Helmore Partner and National Practice Group Leader Commercial Insurance Malcolm Cameron said.
“With the current annual cost of $38 billion attributed to natural disasters, the insurance industry is committed to a proactive approach to climate resilience, with the affordability and availability of insurance an area of focus.”
In New Zealand Duncan Cotterill Partner Rob Coltman has highlight the confluence of issues arising from the Ukraine conflict together with global supply chain issues following the pandemic.
“The insurance issues raised are broad and fast-moving,” he said. “They are especially pertinent to insurers’ marine, aviation and trade credit portfolios. The sector response is still evolving.”
The New Zealand Government is currently consulting on a draft insurance contracts bill which includes reforms around the duty of disclosure, unfair contract terms, plain language in policy documents and utmost good faith.
“This is a once in a generation modernisation of insurance law that makes New Zealand one of the first jurisdictions to align with developments in the UK,” Duncan Cotterill Special Counsel Rob Merkin says.
Click here to read the full report.
