Risk radar report identifies climate, AI and regulatory challenges for insurers

The global insurance market is facing a unique combination of climate, AI and regulatory challenges, according to Global Insurance Law Connect’s (GILC) 2024 Risk Radar report. GILC, a global alliance of insurance law firms, said the report identified natural disasters linked to climate change, cybersecurity, AI and regulations relating to consumer protection as the biggest challenges facing insurers in 2024. Gillian Davidson, chair of GILC and partner at Sparke Helmore, said: “We continue to see the emergence of major trends that are reshaping the insurance industry in every market and that have a significant global impact. The report shows that insurers in almost every market are grappling with climate-driven disruption, responding to a heightened sensitivity to cyber threats, and embracing the potential for innovation presented by artificial intelligence, all against a backdrop of increased geopolitical risks.” She added: “A new theme that has appeared in this year’s report is the focus on the regulatory and compliance challenges facing insurers relating to consumer protection. Customers want a fully customised and personalised experience, and regulators are pushing for a stronger focus on customers’ interests. They want more transparency, stricter regulations on insurance practices, and fair treatment of policyholders.” The 2024 Risk Radar report gives updates on regulatory, political and legal changes that will impact insurers based on insights from law firms in 27 countries. German law firm Arnecke Sibeth Dabelstein said: “Cyber risks and insurance are still a dominant topic in the German insurance market, particularly in the area of D&O insurance… There is continuing consolidation in the broker space. Meanwhile, in response to high insurance prices and scarce capacity, large companies in Germany are increasingly considering the creation of in-house captive insurers.” In France, Robert Byrd, partner, Byrd & Associates, noted: “The Supreme Court’s ruling on 15 June 2023 is significant for foreign insurers covering risks located in France, who must be particularly attentive when drafting exclusion clauses to adapt their policies to French law.” UK law firm Beale & Co said: “It is an intriguing period in the UK insurance market. What was an extremely hard market during the pandemic has softened considerably. We are seeing traditional insurers competing with MGAs from jurisdictions such as Bermuda, offering cover at competitive rates. At the same time, notifications of circumstances that may give rise to a claim are increasing, as is the severity and frequency of claims.” In the US, law firm Foran Glennon said: “The US insurance market finds itself at a critical juncture, grappling with multifaceted challenges stemming from climate change, infrastructure vulnerabilities, and escalating cybersecurity threats. Climate change-induced natural disasters have led to a surge in insurance claims, prompting insurers to reassess risk models and adapt underwriting practices.” It added: “Similarly, the deteriorating state of US infrastructure, coupled with the increasing frequency of extreme weather events, has heightened insurers’ concerns over infrastructure-related risks and liabilities. Moreover, the ever-evolving landscape of cybersecurity threats presents complex challenges, as insurers navigate the complexities of accurately assessing and mitigating cyber risks while ensuring the adequacy of coverage.” Brazilian law firm Santos Bevilaqua Advogados said: “The Brazilian insurance market is experiencing a critical moment of transition with the growth of insurtechs, the arrival of artificial intelligence, and the consolidation of the long-term effects of the opening up of the reinsurance market in 2007. At the same time, we have the prospect of a new national insurance law that, if approved, will bring a significant degree of intervention in the insurance industry, from underwriting policies to contract wordings and claims proceedings.” In China, law firm Buren said: “The Chinese insurance market is evolving in the face of regulatory reforms, technology advancements, and shifting consumer preferences. The increasing awareness of risk management is generating rising demand for insurance products and services. Regulatory authorities have implemented measures to ensure market stability, safeguard consumers’ rights, and promote innovation.” It added: “While the market offers prospects for growth, insurers are confronted with challenges such as regulatory compliance, cybersecurity risks, and intensifying competition. Navigating these dynamics requires strategic vision, agility, and a deep understanding of the evolving landscape in China’s dynamic insurance market.”

Risk radar report identifies climate, AI and regulatory challenges for insurers

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