Increasingly serious, and potentially more costly, “smart” exposures, the growth of third party litigation funders, as well as a host of emerging risk scenarios from opioids in the US to collective redress in Europe are challenging an already challenged liability insurance market. Businesses need to do everything possible to ensure their products are safe and their operations have strict risk management processes which limit risk and prevent claims from arising, explains Ciara Brady.
1. You have been at the helm of a global liability insurance underwriting team for over a year now. What lessons have you learned?
After a full year in the role, I have relearned a few of the insurance basics I first learned many years ago. The insurance cycle is a challenging one to break and a first-mover is needed. The current insurance cycle is at a challenging point and, if rates and coverages don’t firm up, I would not be surprised if capacity withdraws from the market. Pricing has deteriorated and claims trends such as larger court verdicts, expanded exposures for non-US companies doing business in the US, an increase in automotive parts recalls, liability shifting due to technological advancements (for example, detailed component or ingredient tracking in end products), and rising medical costs are putting pressure on liability insurers. AGCS is committed to writing liability insurance and to do so the team has been charged with being first-movers. We have started adjusting our pricing and terms to reflect a refined appetite and we will continue to do so over the next year. My goal is two-fold: one, to be a reliable long-term partner to our customers; and, two, to do that I need to ensure that liability is a longterm contributor to underwriting profit for AGCS and the Allianz Group.
The next 12 months will be challenging, as we review each account and challenge many customers. However, it is necessary after many years in a soft cycle.
2. Businesses are faced with increasingly serious and potentially more costly exposures in the "smart", digital world like cyber events. How can liability insurance ease some of the uncertainty?
Traditional liability insurance policies continue to provide coverage for bodily injuries and property damages resulting from cyber events. However, so-called “silent cyber” events are also occurring, such as the Petya/NotPetya attacks in 2017 which caused over $3.3bn losses to businesses, and which can result in potential cyber-related losses stemming from traditional policies not specifically designed to cover cyber risk and therefore not implicitly including or excluding them. This coverage ambiguity can result in a “silent cyber” scenario, whereby an insurer may have to pay claims for cyber losses off a policy not designed for that purpose. At AGCS we have introduced contract language to address this silent cyber exposure, which has turned silent cover into affirmative coverage allowing customers and brokers to have clarity on what is covered under a general liability (GL) policy.
3. In the past, the cost of legal fees discouraged plaintiffs from bringing questionable lawsuits against companies. But, now, third-party litigation funders of class actions are the norm. What concerns you about this trend from an insurance perspective? How can businesses better prepare?
Ligation funders are a growing concern for all liability Insurers. Estimates are that this industry has grown to around $10bn globally – up to half of that in the US market – although some put the figure much higher in the $50bn to $100bn range. The increased big business around US courts makes it extremely challenging to underwrite liability exposures, as well as for claims teams to accurately assess claims values. To prepare for this uncertainty, businesses need to do everything possible to ensure their products are safe and their operations have strict risk management processes which limit risk and prevent claims from arising.
4. Liability insurance exposures can arise from many sources - from third-party actions, products or emerging risks to environmental disasters. Where will liability insurance go next? What are some emerging trends?
Liability insurance tends to evolve with regulation and new technology or new products. For this reason, we work closely with customers, claims, risk consulting and other Allianz entities to stay on top of local and emerging trends within our book. Such trends can be local or global and can range from legalization of cannabis in Canada to opioids litigation in the US to collective redress in Europe. I believe liability insurance is moving through a time of intense challenge. Claims costs are increasing globally and consumers’ propensity to sue continues to increase, especially in the advent of social media. This will pressure businesses and ultimately consumers to adapt – as costs associated with claims do need to be reflected in insurance premiums. That said, however, it also permits businesses with strict risk management controls and disciplined implementation of these controls to receive differentiated insurance terms. They may be rewarded for their due diligence.
Biography Ciara Brady
Ciara Brady joined AGCS in January 2019 from Swiss Re, where she was Head of Casualty Treaty Global and International. In a career spanning almost 20 years in the insurance industry, both in Canada and Switzerland, Brady joined Swiss Re in 2005 in Toronto, and since that time has taken on increasingly senior roles in casualty underwriting. Brady is based in Zurich.
Ciara Brady
Global Head of Liability
+41-44-285-1661
ciara.brady@allianz.com
Download Global Risk Dialogue Winter/Spring 2020
This article is part of the our Global Risk Dialogue. Appearing twice a year, Global Risk Dialogue is the Allianz Global Corporate & Specialty magazine with news and expert insights from the world of corporate risk.
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