Insurance market predictions from DAC Beachcroft

International experts at DAC Beachcroft have offered their predictions on the opportunities and challenges that the insurance market may face in the future, including increased regulatory focus on insurance policy wordings, the likely expansion of state-backed reinsurance solutions, and Chinese insurance market growth. According to DAC Beachcroft, the coronavirus pandemic highlighted a clear mismatch between the expectations of many insureds and insurers as to how their policies should respond to Covid-related claims. “As a result, we expect the Financial Conduct Authority and other regulators to address product design, policy wordings and product governance in future regulatory initiatives. In October, Lloyd’s published Building simpler insurance products to better protect customers, setting out three areas of focus for the insurance industry: product language and presentation; product design; and greater customer involvement to build simpler, more relevant products. Expect these issues to be high on the agenda for the next few years,” the law firm said. It also noted how the pandemic has heightened discussions about the role of the state in supporting the (re)insurance market to provide solutions to mega risks that are beyond the scope of the private insurance market to reinsure. “The UK Treasury produced a discussion document just before lockdown in March, seeking to bring together the current fragmented approach to risks that fall beyond the capabilities of commercial (re)insurers to absorb. Long-term export credits, terrorism and flooding are already subject to schemes ultimately underwritten by government. Cyber was already being widely discussed as the next risk that would need a similar solution and now pandemics have been added to the list. The discussions could lead to the consolidation of state support into a single entity,” it said. The pandemic will also increase the risk of errors and omissions claims against brokers, said DAC Beachcroft, in particular claims by commercial customers (many being SMEs) facing business interruption losses caused by the lockdown measures. “While the Supreme Court decision in the FCA test case seeks to bring clarity to this very complex area, there will be customers who will claim they should have been advised to take out business interruption cover that would have responded to the pandemic,” it said. DAC Beachcroft also noted that China reported a 4.9% growth of its economy year on year in the third quarter of 2020, with an annual expansion of 1.9% forecast by the International Monetary Fund, while its property and casualty market is also expected to grow 8.8% annually from 2020 to 2030 in gross written premium. “Coupled with the government’s efforts to boost domestic demand via a new ‘dual circulation’ model, the strategy to shift investment to high-tech industries, and reforms to permit 100% shareholding ownership by foreign insurers in China, this might lead to a greater presence of western insurers in China in service lines where domestic players are less experienced, including liability (such as product liability, D&O and cyber), contingency and business interruption,” said DAC Beachcroft. The full, extensive range of predictions can be viewed at: https://insurance.dacbeachcroft.com/predictions

Insurance market predictions from DAC Beachcroft

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