London Market must keep evolving as global volatility increases, warns Kennedys
With the pace of change in the global insurance market showing no signs of slowing in 2020, we have underlined the London Market’s need to reassert its ability to adapt and manage the constant evolution of global risk.
Releasing our annual London Market forecast for the year ahead, we have made predictions across 11 areas impacting the London Market, namely: aviation, casualty coverage, construction, cyber, energy, financial lines, marine, product liability and life sciences, professions, political risks and property damage.
Our forecast predicts the greatest risk will be climate change, where a new voice has emerged - the voice of a global social conscience, led by arguably the world’s most influential teenager. Whether you share her perspective or not, the ‘Greta Thunberg effect’ is undeniable in the rise of global conversation around climate risk and the need to act.
Other predictions include:
- UK airlines moving their operations to the EU if the Department of Transport doesn’t devise a post-Brexit solution for access to ‘open skies’ in the EU;
- A new wave of climate change litigation as climate science improves and extreme weather events become more frequent, resulting in potentially massive liabilities for the insurance sector and posing new challenges for the insurability of climate-related events;
- An increase in sexual harassment claims, although the ramifications for general liability insurers are likely to be limited, with employers’ practices liability insurers being most at risk. The recent talk of a settlement of the Weinstein civil claims by insurers at less than US$50 million gives hope to the market that these types of claims may not be the next Armageddon scenario;
- Sadly, there will be more high-profile corporate collapses, with Beales the latest casualty. It is a fair bet that further liquidations will lead to an increase in claims against D&Os as insolvency practitioners look to maximise recoveries for creditors;
- ‘Modern Methods of Construction’ will start to throw up more issues around construction insurance. We are already seeing numerous claims with issues around pods constructed off-site and expect the courts to be asked to set some direction in this area;
- Data subject claims will increase, not only in volume but also in value. Alongside this, we expect the Court of Appeal decision in Lloyd v Google to be appealed, bringing with it further change;
- In marine, the sulphur cap that came into force on 1 January and requires vessels to reduce sulphur emissions will likely lead to disputes between owners and charterers as they seek to allocate responsibility for the costs associated with the cap; and,
- Given the rise in environmental concerns and corporates being held accountable for their corporate social responsibility, expect to see increasing claims related to reputational damage.
Anticipating changing risk perceptions remains key to retaining the unique benefits of the London Market
The forecast also points to a shift in the narrative around Brexit this year, which we believe will turn to questions around the length of, and the content of, the negotiations that will take place during the 2020 transition period.
We also expect a gear-change in the domestic agenda, with 30 pieces of legislation announced in the last Queens’ Speech – the largest number since 2006.
Deborah Newberry, head of corporate and public affairs at Kennedys, says: “2020 promises more evolution. As traditional risks look different and emerging risks demand traditional policies to be considered under a new lens, the London Market will need to reassert its ability to adapt and manage the constant evolution of global risk.
“The wealth of experience and expertise within the London Market means that it is well placed to adapt to the changing insurance environment but, it too, needs to continually assess, evolve, strengthen and improve. As has been evidenced in recent years, along with industry-led measures, an understanding of potential market disrupters is vital. Anticipating changing risk perceptions remains key to retaining the unique benefits of the London Market.”