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Annual Insurance Review 2020 ADVISORY | DISPUTES | REGULATORY | TRANSACTIONS
ANNUAL INSURANCE REVIEW 2020 1 Contents 3 Introduction 4 Accountants 5 Art and specie 6 Brokers 7 Construction 8 Contingency 9 D&O 10 Energy 11 Financial institutions 12 Financial professionals 13 General liability 14 Health and safety 15 Intellectual property 16 International arbitration 17 International property 18 Legal practices 19 Life sciences 20 Marine and shipping 21 Media 22 Medical malpractice
2 Contents (continued) 23 Miscellaneous professional indemnity 24 Pensions 25 Political risk and trade credit 26 Power 27 Procedure, damages and costs 28 Product liability 29 Property and business interuption 30 Regulatory 31 Restructuring and insolvency 32 Surveyors 33 Technology and cyber 34 Asia and Australia 36 Europe 39 Latin America 40 US 42 Middle East and Africa 43 Offshore 44 Contacts 48 Acknowledgements
ANNUAL INSURANCE REVIEW 2020 3
Introduction
Hello and welcome to the 2020 as a key risk factor this year, there is a sense significant issue across many classes, this
edition of RPC’s annual insurance that this may simply be because we’re all year we can see across the articles that
review. Here you will find updates tired of mentioning it! The reality remains climate change and the increased pressure
that Britain’s trade arrangements with its to decarbonise our energy industries and
from our experts across a whole
traditionally closest partners will remain in economies as a whole has climbed very
range of business classes as well a state of flux for some time to come. much to top of the risk agenda.
as from around the world. In the
articles that follow you will be able Add to this that Donald Trump will be Of course this generates fascinating
to read our take on key issues that contesting an election once again. (The opportunities around the world (you
have impacted your market in the only difference being that this time it will can read about huge solar farm projects
be less of a surprise if he wins.) Tension with in Australia and Africa and vast offshore
year gone – and our thoughts on
Iran and impeachment proceedings only wind turbine fields). But now we can even
the issues likely to affect you in create more global uncertainty. Quite what talk of the insurance market being the
the year to come. international trade will look like by the time drivers of political change – with many
of the US elections towards the end of the refusing to provide cover to traditional
In the introduction to our 2017 Annual year – your guess is as good as ours. coal powered energy companies. (Even
Insurance Review we spoke about how US insurers against (presumably) the will
But unlike 2017, when these issues of their president.)
political upheaval resulting from the
seemed fresh, daunting but (dare one
twin shocks of the result of the Brexit
say it) possibly exciting, now there is a So perhaps 2020 will be the year that
referendum and Donald Trump’s election
sense of more wide ranging and deep- insurers will be more aligned with the
victory would impact on the insurance
rooted political activism across the world, political activists than with governments?
market. Three years on and perhaps
exemplified by the protests in Hong Kong
now more than ever there is a sense that Elsewhere you will be able to read about
that have been running since June and
matters are coming to a head and that the “weaponised” use of GDPR in medical
which show no signs of abating.
the geo-political instability as a whole is malpractice claims, the continued increase
dominating the risk outlook. 2019 was also the year of the Extinction in the use of technology in adjusting and
Rebellion and Greta Thunberg – political evidence gathering and much, much more.
Notwithstanding the result of December’s
activism in the cause of a call to action on
general election, Brexit uncertainty From all at RPC, we wish you a very happy
climate change. Whilst our review of 2019
still hangs over us. Whilst fewer of our New Year.
saw the impact of climate change as a
individual articles, perhaps, mention Brexit
Simon Laird Rob Morris
Partner Partner
T +44 20 3060 6622 T +44 20 3060 6921
simon.laird@rpc.co.uk robert.morris@rpc.co.uk
Toby Higginson
Partner
T +44 20 3060 6581
toby.higginson@rpc.co.uk
4
Accountants
By George Barratt
Key developments in 2019 The key question was held to be whether by a new oversight body, the Audit,
the auditor was giving ‘advice’ or merely Reporting and Governance Authority.
The duty of care in accountancy claims was
providing ‘information’. Where an As predicted in our last annual insurance
the subject of two key cases in 2019.
auditor is ‘responsible for guiding the review, the ‘going concern’ standard
In AssetCo, the High Court stated for the whole decision-making process’ they has also been strengthened in response
first time that auditors can be liable for may be liable for all foreseeable financial to recent enforcement cases and well-
a company’s trading losses caused by a consequences. Otherwise, the negligent publicised corporate failures.
negligent audit. auditor can only be responsible for the
direct consequences of their advice being The regulatory environment is however
This widening of the scope of auditors’ wrong. In this case, that meant a liability set to change further. A key area to watch
liability may appear to be bad news for of just a few hundred thousand pounds out for will be whether or not the scope of
accountancy firms and their insurers; instead of tens of millions. This decision audit is extended to specifically include the
however there are caveats in the judgment provides a useful framework for Insurers to detection of fraud (which has never been a
which soften the blow. assess the potential exposure to a claim at statutory requirement).
an early stage. The market already appears to be gearing
Firstly, there is a carve-out in relation to
dividends and other ‘intervening acts’ up for the possibility of joint-audits,
What to look out for in 2020 creating opportunities for so-called
on the part of directors which do not fall
within the scope of an auditor’s duty. It also A long-anticipated shake-up of the audit ‘challenger firms’ outside of the big four.
appears likely that in cases such as this one sector remains on the cards and has been We expect this trend to continue; however
(particularly those involving dishonesty by thrown into the spotlight once more there are unresolved issues in relation
management) the company will be liable following the collapse of Thomas Cook to litigation risk, such as the scope of
for contributory fault, which will reduce the (which is being investigated by the FRC). joint and several liability in the case of
loss attributable to the negligent auditor. mandatory joint-audits.
Following reviews of the audit market by
The profession can also draw some Sir John Kingman and the CMA, we now While there appears to be a renewed
comfort from the earlier decision of await the results of a third independent momentum behind the calls for audit
Manchester Building Society, in which review into the sector (this time led by reform, much depends on the level of
the Court of Appeal reiterated the basic Sir Donald Brydon). political will to implement proposed
principle that auditors will only be liable changes in the coming year.
if they assume responsibility for the We have already seen an overhaul of the
decision-making that leads to losses. audit regulator, which is due to be replaced
Karen Morrish Rob Morris
Partner Partner
T +44 20 3060 6521 T +44 20 3060 6921
karen.morrish@rpc.co.uk robert.morris@rpc.co.uk
ANNUAL INSURANCE REVIEW 2020 5
Art and specie
By Emily Rome
Key developments in 2019 The Ruffini scandal is thought to extend pointing specifically to 500 pieces of art
to internationally recognised museums being left on the facility’s ground floor
Crime in art and respected intermediaries. In throughout the storm. Christie’s was by no
2017, Sotheby’s in New York refunded means alone in having artwork damaged
When the French authorities seized the
US$840,000 to the buyer of a Parmigianino by the storm; Manhattan’s Chelsea
painting “Venus”, attributed to Lucas
sold in 2012 that had originated with Ruffini. neighbourhood was also hard hit. In 2017,
Cranach the Elder in March 2016, as a
In September 2019, the possible creator the Louvre was partially flooded and two
potential forgery, they unknowingly
of the works sold by Ruffini was arrested. Poussins damaged.
kicked off a scandal that has continued to
Expect more Ruffini-related claims under
snowball. A dealer called Giuliano Ruffini If art is damaged it is sometimes possible
professional indemnity policies.
sold dozens of Old Master paintings for to restore it, but when this is not possible
millions over the past few decades – and the claim may be the full value of the art.
What to look out for in 2020
it now seems that many of them may be Assessing damage to work and deciding
modern fakes. whether it can be repaired or if it is a
Climate change
total loss is a largely subjective process,
Buyers are already turning on the With the phenomenon of Greta Thunberg requiring multiple experts. This is both
professional intermediaries who sold the and the UK Parliament declaring a climate expensive and time consuming.
paintings. In one such claim last year, change emergency, it is timely to reflect
Sotheby’s compensated a buyer who was on the impact of climate change on the art With extreme weather intensifying,
sold an allegedly fake Franz Hals, and market. An obvious risk is in respect of art in 2020 and beyond, close scrutiny of
then sought to recover its losses of circa left in storage facilities. There is more art measures taken by art storage providers,
US$11m from the seller, Mark Weiss, a in existence than ever before resulting in museums and collectors to protect against
British art dealer, who had purchased the more art being left in storage facilities. unpredictable extreme weather will be
painting from Ruffini in 2010, and Fairlight essential. Nevertheless, insurers are likely
Arts Venture Company, who were also When hurricane Sandy hit America in to see more claims in respect of damage
involved in the deal. A settlement in the 2012 a huge amount of art was damaged caused by weather and they will have to
sum of US$4.2m was reached with Weiss in facilities, leading to numerous claims. grapple with the losses arising to both
and we await the court’s decision as to By way of example, insurance companies storage facilities and the art.
Fairlight’s liability. brought a US$11.5m claim against Christie’s
Fine Art Storage citing negligence, and
Davina Given Rupert Boswall
Partner Senior Partner
T +44 20 3060 6534 T +44 20 3060 6487
davina.given@rpc.co.uk rupert.boswall@rpc.co.uk
6
Brokers
By Kirstie Pike
Key developments in 2019 point where the ability to find competitive and charge more. The broker’s job of
quotes becomes all-but impossible, and discerning the best deal – in circumstances
For insurance brokers, 2019 was all about
the ‘deals’ that have been the hallmark where they may now only have access to
the hardening UK insurance market. A
of our perennially low-cost market for so one market or receive one quote – has
combination of unprecedented natural and
many years entirely dry up. suddenly become very difficult indeed. It
weather-related disasters and a downturn
will be essential for brokers to get ahead
in economic activity forced insurers to What to look out for in 2020 of the game: get out into the market early,
try to recoup losses through tightened
ensure good quality submissions, explain
underwriting and increased premiums. This As the market tightens even further,
to clients why their premium is going up,
happened far quicker – and hit far harder insurers will look to decrease the number
and be prepared to re-market.
– than many had predicted, affecting of brokers they do business with. From
nearly every line, and it brought with it a a risk perspective, now is the time when The Insurance Act will now assume
number of issues for the UK’s insurance brokers, who have relied less on the even greater significance than it might
broking profession. technical presentation of risks and more on have done in more benign ‘soft’ times.
relationships built on volume, will start to Insurers will look to control their losses by
Brokers tend to be in the driving seat be exposed. Insureds have grown used to scrutinising claims more closely. Brokers
in a soft market environment. The vast extensive covers at ever decreasing prices would be well advised to re-familiarise
majority of brokers in practice today will but, in a market that is in a state of very themselves with its obligations and duties
never have experienced a hard market; rapid flux, insurers are finding themselves in 2020.
they won’t have seen a situation where in the position of being able to offer less
demand outstrips supply, let alone to the
Tim Bull Rob Morris
Partner Partner
T +44 20 3060 6580 T +44 20 3060 6921
tim.bull@rpc.co.uk robert.morris@rpc.co.uk
Karen Morrish
Partner
T +44 20 3060 6521
karen.morrish@rpc.co.uk
ANNUAL INSURANCE REVIEW 2020 7
Construction
By Adrian Hurlock
Key developments in 2019 Against this background, the decisions in What to look out for in 2020
Zagora Management v Zurich, and Herons
Perhaps unsurprisingly, the consequences Brexit, and the uncertainty surrounding the
Court v NHBC, provided some welcome
of the Grenfell Tower fire have continued UK’s future relationship with the European
relief to insurers of privately appointed
to affect the construction industry. With Union, will continue to impact the
approved inspectors. The decisions
the market continuing to harden, and construction sector. Currency fluctuations
confirmed that such approved inspectors
those construction professionals with and the historic weakness of the Sterling
did not owe a duty of care under the
actual or potential exposures to cladding has caused, and will continue to cause,
Defective Premises Act and therefore
finding it challenging to obtain renewal difficulties in tendering and will put
would not be liable under that Act if they
terms, we have continued to see a further pressure on already tight margins.
failed to identify defects when inspecting
large number of both claims and block Contractor insolvencies may, therefore,
and certifying a property for Building
notifications relating to cladding. continue to increase.
Regulations purposes.
Claims against other professionals involved A number of reports and studies, including
The decisions will also make it much harder
in cladding/construction projects (as by the Royal Institute of Chartered
for claimants, particularly third parties,
opposed to the traditional claims against Surveyors, have highlighted the potential
to bring claims in tort against approved
architects and design & build contractors), for large drops in commercial and residential
inspectors. Indeed, we have already seen
have increased. High-profile contractor property values. If correct, we anticipate
a number of claims withdrawn as a result
insolvencies have pushed claimants to an increase in the frequency and severity of
of these decisions and, unless claimants
seek damages from a wider range of claims against surveyors and valuers.
can overcome the high hurdles in pleading
construction professionals; further, the
deceit or fraudulent misrepresentation,
increase in the number and diversity of
or the inspector has provided a collateral
claims has caused a corresponding spike
warranty (each of which may give rise to
in recovery actions against those in the
policy coverage issues), then insurers may
contractual chain.
be able to ‘close the book’ on these claims.
Ben Goodier Peter Mansfield
Partner Partner
T +44 20 3060 6911 T +44 20 3060 6918
ben.goodier@rpc.co.uk peter.mansfield@rpc.co.uk
Alan Stone Alexandra Anderson
Partner Partner
T +44 20 3060 6380 T +44 20 3060 6499
alan.stone@rpc.co.uk alexandra.anderson@rpc.co.uk
8
Contingency
By Damon Brash
Key developments in 2019 Examples of this include the ongoing spilling over and impacting events. These
protests in Hong Kong and the recent protests show no sign of abating. It
In last year’s review we focussed on the
protests and civil unrest in Barcelona. should be borne in mind, however, that
impact on the contingency market of
widespread civil unrest is not the only way
extreme and unpredictable weather The Hong Kong protests have resulted that events can be disrupted. The current
patterns. It appears that these extremes in, amongst other things, the indefinite tenor of political discourse has made
may be here to stay. Perhaps the most postponement of the 2019 Hong Kong well-organised but targeted protests more
high profile case of this during 2019 was Open Women’s Tennis Tournament, likely, which can equally disrupt events.
Typhoon Hagibis, which hit Japan during, originally scheduled to take place between The recent “uprising” by the Extinction
amongst other events, the Rugby World 5-13 October 2019. Unrest in Barcelona has Rebellion group that was organised
Cup and the Japanese Grand Prix. meant that the football match between for the 5 day period of 14-19 October
FC Barcelona and Real Madrid, always 2019 is a good example. Look for more
Typhoon Hagibis was a major tropical
a major fixture in the Spanish football co-ordinated campaigns of targeted
cyclone causing widespread damage and
calendar, has been postponed from disruption in large cities in 2020, motivated
a large number of deaths. The typhoon
26 October 2019 until 18 December 2019. by issues such as climate change, Brexit
necessitated the cancellation of three
The unrest arose from the jailing of (in the UK) and concerns over social and
group stage matches in the Rugby
Catalan separatist leaders for sedition for economic inequality, similar to the Occupy
World Cup and the postponement of
their role in organising an independence Movement in late 2011 and early 2012.
the qualifying session for the Japanese
referendum in Catalan in October 2017.
Grand Prix. In the end, both events
Spain’s Constitutional Court subsequently Another area that may come to the fore is
continued with comparatively minor
declared the referendum to be illegal. the boundary between a specific threat and
disruption given the size of the typhoon
a general fear, when protests or social unrest
and its impact on Japan as a whole. This What to look out for in 2020 lead to the fear of harm even where there
suggests that organisers of major sporting
is no reason to think a specific event will be
events are becoming more adept at Given that weather extremes may be
impacted. Policyholders faced with reduced
preparing for and accommodating major the new normal, their ongoing impact is
attendance arising from such general
weather interruptions. inevitable. For 2020, however, the bigger
concerns may well prefer to postpone an
issue to look out for may well be the impact
In addition to weather, increasing event. Depending on the wording in place
on contingency risks of increased tension
uncertainty during 2019 has exacerbated and the true severity of any threat, this may
and uncertainty in world events, both
tensions in many parts of the world. This has lead to the boundaries of the contingency
economic and political.
impacted events and event planning and cover in place being tested.
will doubtless have a consequential impact The ongoing Hong Kong protests are one
on the contingency insurance markets. example of this tension and uncertainty
Naomi Vary
Partner
T +44 20 3060 6522
naomi.vary@rpc.co.ukANNUAL INSURANCE REVIEW 2020 9
D&O
By Lara Stacey
Key developments in 2019 these claims are extremely costly to defend. We expect that claims will be framed in
We understand that litigation funders have breach of directors’ duties. Directors
As predicted in last year’s Annual
agreed to fund the following shareholder have a duty to promote the success of the
Insurance Review, we have seen an
actions (which are either related to market company for the benefit of the members
increase in market abuse investigations
abuse or closely connected) against as whole and should have regard to “the
by the Financial Conduct Authority (FCA)
Petrofac, Metro Bank and Glencore and are impact of the company’s operations on
impacting directors and officers cover.
investigating shareholder actions in relation the community and the environment”
This corresponds with the FCA’s mission
to Patisserie Valerie. (section 172(1)(d) Companies Act 2006). In
statement that “preventing, detecting
the current political climate this is likely to
and punishing market abuse is a high What to look out for in 2020 take on increased importance in directors’
priority for us” and their goal to crack
decision making and reporting to the
down on individuals who fail to meet We anticipate that in 2020 we will see a
company/shareholders.
their obligations under the Market Abuse rise in claims against directors related to
Regulations (MAR). the environment and climate change. We Potential claimants will be watching to
expect that efforts to increase publicity see how the high profile cases involving
As with Serious Fraud Office (SFO) around the dangers of climate change will ExxonMobil play out. The first concerns
investigations, FCA market abuse become more sophisticated and there will the New York Attorney General’s claim
investigation costs and subsequent be an increase in activists purchasing shares against ExxonMobil for allegedly defrauding
defence costs are significant, as it is in “environmentally unfriendly” companies investors by downplaying climate change
common for the FCA to investigate to allow them to bring derivative claims risks to the business. The second involves
multiple directors. The FCA also requires against the directors and/or companies. the shareholders claim against several
numerous other individuals to assist them
ExxonMobil directors for failing to protect
in their investigations, made possible Whilst this is likely to be of more concern to
their investments and company from the
due to the FCA’s broad powers to compel directors/companies where the companies
risks of climate change.
information relevant to its investigations. are engaged in high profile “environmentally
unfriendly” activities (oil and gas Directors and Officers Insurers should
The knock-on effect of market abuse companies), there are many companies carefully review their policy wordings
investigations for Directors and Officers indirectly involved including transportation to ensure they cover the risks that they
Insurers has been an increase in claims by and manufacturing companies. Claims intended to cover.
shareholders against companies under could extend to asset managers (and other
section 90A of the Financial Services and professionals) who have failed to consider
Markets Act 2000. Most Directors and the risk of climate change when considering
Officers policies will cover the companies’ what investments to buy/sell.
costs of defending a securities claim and
James Wickes Simon Goldring
Partner Partner
T +44 20 3060 6047 T +44 20 3060 6553
james.wickes@rpc.co.uk simon.goldring@rpc.co.uk
Alison Clarke
Legal Director
T +44 20 3060 6173
alison.clarke@rpc.co.uk10
Energy
By Gary Walkling
Key developments in 2019 As a result of this shift, insurers have been to have some success with modest rate
looking to refocus their search for premium increases and restrictions of cover, and
In our last Annual Insurance Review, we
in other parts of the energy market. One of that this could continue this year. This will
predicted that divestment from the coal
the main beneficiaries of this trend has been be important for insurer profits, given that
industry would remain a pertinent issue
the renewable energy market. With insurers claims on renewables projects have also
in 2019. The strategic shift away from
keen to burnish their green credentials, been increasing.
underwriting coal-generated energy has
there has been an abundance of capacity
indeed been one of the major trends of the The types of claims that are particularly
and rates have, so far, remained low.
past year, with insurers looking to more prevalent in renewables often relate to
sustainable alternatives. What to look out for in 2020 defective design and damage caused to
structures by extreme weather conditions.
In July, Chubb announced that it would no In circumstances where the underwriting One of the challenges for underwriters
longer sell new insurance policies, or invest of coal powered assets is increasingly to contend with in 2020 is the speed at
in businesses which generate more than being eschewed, insurers are looking for which new technologies are developed
30% of their revenue from coal-mining or alternative sources of premium income. (for example larger wind turbines) and how
coal-fired electricity. The announcement A look to the future of renewable energy these changes can affect the risk profile of
also stated that Chubb would gradually insurance provides an indication of where the project.
phase out existing investments and policies some of this capacity might be headed.
by 2022. Similar plans for divestment have
been announced by other insurers including The global supply of solar, wind and hydro
the Uniqa Group, Mapfre and QBE. power has been growing faster than
expected, and renewable sources now
The majority of insurers that have generate more energy than their traditional
announced divestment plans to date have fossil fuel counterparts. Renewable energy
been headquartered in mainland Europe. output is projected to grow by 50% within
However, Chubb’s announcement is the next five years. This boom is partially
particularly significant because they are the a result of the increasing affordability of
largest provider of commercial insurance renewable power sources, almost all of
to the US market. Indeed, in the past year which are now on par with oil, coal and gas.
we have seen increased pressure placed
on US-based insurers. Organisations such Whilst limits, and therefore premiums, on
as Unfriend Coal publish lists comparing renewables projects tend to be smaller
the steps taken by insurers and there has than those on conventional power stations,
been a considerable level of interest from the number of sites is quickly increasing.
the press, as well as engagement from Despite high capacity in the market, we
institutional investors. understand that insurers are beginning
Leigh Williams
Partner
T +44 20 3060 6611
leigh.williams@rpc.co.ukANNUAL INSURANCE REVIEW 2020 11
Financial institutions
By Matthew Wood
Key developments in 2019 put the firm or its customers in “significant games. Exchange tokens, and most utility
harm”. The third element is the new tokens, are not “specified investments”
As we foreshadowed in 2018, 2019 saw a sea
Conduct Rules, which set out expected and fall outside the regulatory perimeter.
change for financial services regulation.
behaviours for almost all employees of A cryptocurrency exchange is therefore
On 9 December 2019, the Senior Managers
authorised firms. Both require significant not carrying on a regulated activity by
and Certification Regime (SMCR) replaced
planning and investment in compliance facilitating transactions in exchange tokens
the Approved Persons Regime (APR)
processes, as well as staff training. such as Bitcoin.
for authorised firms regulated solely by
the Financial Conduct Authority (FCA). We are already seeing an increase in FCA In contrast, security tokens are
“Dual-regulated” institutions (including enforcement investigations focusing on cryptoassets which are inside the
banks and insurers) were already subject senior management responsibility, and regulatory perimeter because they share
to SMCR, but the extension presents we expect this trend to continue as SMCR characteristics with traditional securities,
compliance challenges for the 47,000 becomes more embedded. and are therefore “specified investments”.
“solo-regulated” firms, which tend to be For example, a security token might
smaller and more diverse. What to look out for in 2020 entitle the holder to a proportion of the
issuer’s profits – resembling traditional
SMCR aims to strengthen market integrity The FCA’s guidance on the regulation of
shares in the issuer. Regulated activities
by enabling firms and regulators to hold cryptocurrencies and other “cryptoassets”,
involving security tokens are likely to
individuals to account. Its essence is published in July 2019 following a six-
require similar FCA permissions as if they
therefore individual responsibility. SMCR month consultation, heralds increasing
involved traditional securities. For example,
has three core elements, the first being regulatory scrutiny in this area. In
an exchange which facilitates trading of
the Senior Management Functions (SMF) particular, the guidance emphasises
security tokens may require permission to
regime. This replaces the controlled that those dealing in more sophisticated
“arrange deals in investments”.
functions regime and introduces a cryptoassets should consider carefully
statutory duty of responsibility, which whether they are carrying on regulated Whilst the FCA’s guidance clarifies the
requires senior managers to take activities, which require FCA permissions. position rather than making new rules, it
reasonable steps to prevent regulatory highlights that the increasing sophistication
breaches from occurring or continuing. The guidance distinguishes between three
of cryptoassets is well and truly on the
types of cryptoassets, namely exchange
regulator’s radar. Firms and their insurers
Many SMFs will “map across” from the tokens, utility tokens and security tokens.
should also be aware of the incoming FCA-
old regime, but the other two elements Exchange tokens include cryptocurrencies
supervised anti-money laundering regime
of SMCR may prove more burdensome, such as Bitcoin, which serve as a means of
for UK cryptoasset businesses, which takes
especially for smaller solo-regulated firms. exchange akin to traditional currency. Utility
effect from 10 January 2020 and carries
The second element is the Certification tokens grant access to a product or service
registration requirements.
Regime, which requires firms to assess and – for example, a token issued by an online
certify individuals who could potentially casino and used solely to play that casino’s
James Wickes Simon Goldring
Partner Partner
T +44 20 3060 6047 T +44 20 3060 6553
james.wickes@rpc.co.uk simon.goldring@rpc.co.uk
Alison Clarke
Legal Director
T +44 20 3060 6173
alison.clarke@rpc.co.uk12
Financial professionals
By David Allinson
Key developments in 2019 could lead to a massive burden on the Cryptoassets taskforce, which also includes
Financial Services Compensation Scheme HM Treasury and the Bank of England.
Once again, defined benefit pension
(FSCS) in circumstances where (at present at
transfers dominated the landscape for The FCA’s new role comes about as a
least) actual complaint volumes have been
financial professionals. consequence of increased concern about
low as customers are presumably happy
with the significant capital sums obtained. crypto assets being used to fund illicit
In 2019, the Financial Conduct Authority
activities; the Treasury has noted that the
(FCA) completed an extensive survey of
As well as defined benefit pension pseudo-anonymous nature of such assets
firms holding pension transfer permissions,
transfers, claims against self-invested (and their global reach) made it possible
with 3,015 firms responding to a data
personal pension (SIPP) administrators to obfuscate the source of funds, making
request. The results caused the FCA yet
and operators have continued to blossom, them attractive to criminals. Beyond this,
more cause for concern. One issue was the
though many are still awaiting the outcome crypto assets are viewed by FCA as high
volume of transfers that have taken place;
of the now well overdue decision in Adams risk and speculative.
between April 2015 (the advent of Pension
v Carey (likely to be the first judgement
Freedoms) and September 2018 234,951 From 10 January 2019 onwards, all
ruling on SIPP operators’ legal duties).
customers received advice, with 69 per businesses carrying on certain crypto asset
cent being advised to transfer – a worry Finally, the rash of interest only mortgage activities need to be registered with the
for the FCA given the starting assumption claims pursued by ambulance chasing law FCA, whose consultation on proposals for
is that a transfer will be unsuitable for firms continue to proliferate and will need recovering the costs involved with their
most. Furthermore, the sums involved are careful and coordinated handling into new role closed in December – we await
significant, with the average transfer value next year. the final rules in early 2020.
being £352,303 and a total sum transferred
of £82.8 billion. What to look out for in 2020 Such assets may appear attractive in times
of flat growth but advisors should be aware
The FCA has now made further enquiries 2019 was the year in which the FCA that this is an area of regulation that is very
of firms where the potential for harm to published its finalised guidance on crypto much in its infancy. However, given the
clients exists. The increased pressure has assets, and scrutiny in this area is set to high risk nature of such assets, combined
led to some big players leaving the market ramp up in 2020, as the FCA will become with the money laundering risk, we can
and continues to cause headaches for the anti-money laundering and countering expect a heavy degree of involvement
remaining firms. What we don’t know yet is terrorist financing supervisor for firms from the regulator and the scope for claims
how exactly the FCA will look to rectify the carrying on crypto asset activities from here is potentially significant.
perceived issues; a heavy handed approach 10 January. The FCA is already part of the
Rob Morris Rachael Healey
Partner Partner
T +44 20 3060 6921 T +44 20 3060 6029
robert.morris@rpc.co.uk rachael.healey@rpc.co.ukvANNUAL INSURANCE REVIEW 2020 13
General liability
By Jonathan Drake
Key developments in 2019 The current actuary report for England and All these proposed changes are subject
Wales envisages the possibility of more to implementation by Regulations. There
The calculation of a lump sum for future
than one rate in the future, determined has already been some slippage in the
financial loss includes applying a discount
for example by the length of time of the timetable; the changes were originally
rate which represents the rate of return
anticipated loss. The Court also has an anticipated to have been in place by now.
that Claimants are expected to earn
inherent power to apply different interest The current political situation makes the
when investing it. The discount rate is
rates on a case by case basis. timing and even the implementation of the
intended to ensure that the opportunity
proposed changes uncertain.
to invest does not result in either over or However, we consider this further
under compensation, and assumes risk- development to be unlikely because One of the consequences of the proposed
averse investment. it would introduce unwanted further increases to the small claims limit could be
complexity and uncertainty into calculation the use of Damages Based Agreements,
In February 2017, the Lord Chancellor had
of future loss. Since 2001 no Court is which make a Claimant liable to pay his
changed the discount rate from 2.5% (the
thought to have departed from the legal fees only if the claim is successful.
level at which it had stood since 2001) to
standard rate. Such agreements have been permitted
minus 0.75%.
since 1 April 2013 but have not been
Last year we anticipated implementation What to look out for in 2020 popular, and Claimants have preferred to
in 2019 of a new discount rate applicable to use Conditional fee Agreements.
Assuming that the result of the December
future losses. general election or continuing uncertainty Proposals for potential reform to the
When the result of the further review over Brexit does not derail the whole Damages-Based Agreements Regulations
arrived, it did so in an unexpected way. process, the proposed increase to the small 2013 have been with the Ministry of
With effect from 5 August 2019 the discount claims limit for injury casualty claims to Justice for several months. One of the
rate was increased from the existing rate of £2,000 and increase for road traffic injury obstacles to developing the use of the
minus 0.75% to minus 0.25% for England and claims (other than pedestrians, cyclists, Agreements appears to have been the
Wales. However, on 27 September 2019 the motorcyclists and horse riders) to £5,000 is absence of a uniform model Damages
Scottish Government Actuary announced expected to take place in April 2020. Based Agreement, but the existing
that the discount rate in Scotland will remain Regulations are considered to be flawed.
At the same time claimants will be able to
unchanged at minus 0.75%. The anticipated increases to the small
make a claim with insurers through an on-
claims limit and the potential extension of
The difference arises because the analysis line portal. There will be a tariff for whiplash
fixed costs for claims other than personal
used by the Scottish Government Actuary injury claims with a value of up to £2,000
injury might expedite the creation of a
Department is based upon different and it will be mandatory to obtain a medical
model agreement so that Damages Based
investment and risk assumptions to those report before injury claims are settled.
Agreements are more widely used.
used when setting the rate in England
and Wales.
Gavin Reese Nick McMahon
Partner Head of Health and Safety
T +44 20 3060 6895 T +44 20 3060 6896
gavin.reese@rpc.co.uk nick.mcmahon@rpc.co.uk14
Health and safety
By Mamata Dutta
Key developments in 2019 designed to help employers assess the risks confirmed that ‘Natasha’s Law’ will come
of their employees suffering stress at work into force in October 2021. It will require
Last year, we mentioned that the Health and
and providing practical guidance. It forms all businesses serving pre-packed food to
Safety Executive (HSE) would be focusing
part of a suite of practical guides and toolkits ensure it has a list of all ingredients and
on mental health in 2019. The HSE highlight
that the HSE has produced to help confront allergens noted on a label which must be
that one in four will suffer with a problem
the issue of work related stress and promote affixed to the product.
with their mental health at some point,
the well-being of employees – all of which
and that stress is a major cause of sickness The Food Standards Agency (FSA)
are available to download online from the
absence in the workplace at a cost of over has already implemented a plan of
HSE’s website, free of charge.
£5 billion per year. According to the Labour improvements expected to modernise
Force Survey published on 30 October, What to look out for in 2020 food regulation by 2020. This includes a
595,000 workers suffered from work-related plan to have online registration of all food
stress, depression or anxiety in 2017/18, Last year there were two high profile businesses to assist their regulation by
while 15.4 million working days were lost to inquests into deaths caused by severe the relevant Local Authority. Specific to
these conditions. The total number of cases allergic reactions to food – Natasha Ednan- the death of Owen Carey, the FSA have
in 2018/19 was reported as 602,000. Given Laperouse, who suffered a fatal allergic also confirmed their intention to produce
the significant impact that problems with reaction after eating a roll containing a simple aid memoire for Environmental
mental health have on our day-to-day lives, sesame seeds, and Owen Carey, whose Health Officers and Trading Standards
the HSE’s continued focus on this important allergy to dairy prompted a fatal reaction Officers to assist in their regulation of
topic has been welcomed. after he was served a chicken burger which food safety. They also intend to publish
contained buttermilk. an updated version of “Safer Food Better
Following on from the updated first aid
Business” which will involve a review of
guidance on the issue of mental health Following a campaign led by Natasha’s
allergen information. There will be a clear
issued by the HSE at the end of 2018, in parents, legislation officially known as
focus on the labelling of food allergens and
March 2019 they released a work book the Food Information (Amendment)
the regulation of businesses in this area.
“Tackling work related stress using the (England) Regulations 2019 was introduced
Management Standards approach”, on 5 September. The government has
Nick McMahon Gavin Reese
Head of Health and Safety Partner
T +44 20 3060 6896 T +44 20 3060 6895
nick.mcmahon@rpc.co.uk gavin.reese@rpc.co.uk
Mamata Dutta
Legal Director
T +44 20 3060 6819
mamata.dutta@rpc.co.ukANNUAL INSURANCE REVIEW 2020 15
Intellectual property
By Ciara Cullen and Josh Charalambous
Key developments in 2019 admitted to having access to the Charlotte validity of Sky’s trade marks on the basis
Tilbury designs and were unable to satisfy that: (i) Sky’s trade marks lacked the clarity
One of the most interesting IP decisions
the Court that the similarities between the and precision in terms of the specifications
of the year came from the world of luxury
look-alike and the original were coincidental in which they were registered (eg a trade
beauty and retail. Charlotte Tilbury
and a result of independent creations (ie not mark encompassing “computer software”
successfully sued Aldi, for copyright
copied). was too broad); and (ii) Sky registered
infringement in relation to look-alike make-
its trade marks in bad faith, because the
up products. The case is important to brands looking specifications contained goods and services
to take-on copycats and/or fakes. Popular which were clearly never going to be utilised
Traditionally brands have relied upon
stores selling cheaper look-alikes can by Sky – the example frequently cited is the
trade mark and/or passing off actions to
cause significant harm (monetary and registration for cleaning products.
protect against look-alikes. A passing off
reputational) to established and luxury
case requires the brand to show that the
brands. We expect to see an uplift in The AG Opinion has indicated that:
copycat had made a misrepresentation as to
the number of copyright infringement (i) the trade marks did lack the clarity and
the origin of the look-alike product, which
claims being brought to combat look- precision required; and (ii) it can in certain
causes (or is likely to cause) confusion to the
alikes, together with an uplift in the use circumstances be “bad faith” to register
average consumer. That was not the case
of the Shorter Trials Scheme which was trade marks without any commercial logic
here, as Aldi is open about its “like brands
implemented in this case. or as part of a strategy to prevent third
only cheaper” motto – nobody would have
parties from using the mark.
been confused thinking that the product What to look out for in 2020
(being sold at £4.99) was actually from The impact could be significant and see a
Charlotte Tilbury. We continue to await the final decision number of brands’ trade mark portfolios
from the European Court of Justice (CJEU) face validity challenges. In particular, we
Charlotte Tilbury therefore had to be in Sky v SkyKick. There was a time when would recommend that Insurers offering
creative. The lid of the Charlotte Tilbury it looked as though the UK could leave pursuit cover take steps at the proposal
palette contained an art-deco style the EU without a Brexit deal, throwing stage to enquire as to which goods/
starburst design, and there was a debossed into the air whether the CJEU would even services the marks are being used/have
design on the powder itself. Charlotte deliver its decision to the UK Courts at all. been used in, together with undertaking
Tilbury progressed the claim as copyright The Attorney General’s (AG’s) Opinion, an assessment of the specificity of the
infringement, alleging that the starburst if followed, suggests that there could be specifications used.
design and the debossed design were significant ramifications for trade mark
artistic works and therefore protected owners in 2020 – which will need to be We also expect that Brexit generally will
automatically by copyright. navigated alongside the impact of Brexit. have a significant impact on the licensing of
trade marks and other IP rights. Specifically,
The Court agreed with Charlotte Tilbury The underlying case itself is an action by parties may use Brexit as an excuse to get
and dismissed Aldi’s counter-argument Sky alleging trade mark infringement out of unfavourable licensing deals – if that
that the designs were too generic to attract against SkyKick (a global provider of trend does develop, it seems inevitable that
copyright. Once copyright was deemed to cloud management software). SkyKick contractual disputes will follow.
subsist, it was simple for the Court to find counterclaimed against Sky attacking the
that it had been copied – Aldi’s designers
Ciara Cullen
Partner
T +44 20 3060 6244
ciara.cullen@rpc.co.uk16
International arbitration
By Jonathan Wood
Key developments in 2019 as Chubb’s party-appointed arbitrator in justified view that arbitrators are still of
relation to two policy coverage disputes. the “pale, male and stale” brigade. More
Technology in motion! As this is being
This was not disclosed to Halliburton. needs to be done to improve the diversity
written, the case of Halliburton v Chubb
The scope of a duty of disclosure is of arbitral panels from different points of
Insurance is being argued and aired via
controversial from a variety of standpoints. view – gender, ethnicity, race, religion as
livestream direct from the Supreme Court
Multiple appointments are a feature of, well as social background. At a time when
where the Court is hearing submissions
for example, London Maritime Arbitration diversity is increasingly an issue for the
on whether and when an arbitrator should
Association and commodity arbitrations. insurance market, so too does it have an
disclose multiple appointments. Watching
impact on the selection of arbitrators;
by livestream in itself is an example of how There is a view that in an age of there are many diverse candidates available
the courts are adapting to and embracing transparency, there is a need for more for selection, and yet we continue to see
technology. No longer do we have to queue rigorous disclosure so as to preserve the the widespread selection of male QC’s
to have our pockets turned out and our integrity of the process which may deter and judges as arbitrators in insurance and
bags security checked to gain access as an overseas parties from selecting London reinsurance disputes.
observer to a hearing before the Supreme as the seat for their arbitrations. This in
Court. It’s all there at the flick of your mouse turn may affect the approach to dispute As for “green awareness”, the number
on the screen of your personal computer. resolution in international insurance and of trees felled for the purposes of a
reinsurance policies. We now await what major arbitration is mind boggling.
So what was the case about and why was it
stance the Supreme Court will take on all Research is being conducted into this,
important to the insurance industry, and,
of this. But, as a side comment, there is and encouragement is being given to
perhaps more widely, as it affects London as
little likelihood of watching a commercial ways of reducing the carbon footprint
a centre for international arbitration? It is all
arbitration publicly by livestream, as of arbitration by the use of technology
to do with the extent to which an arbitrator
confidentiality remains the major selling and more hearings by video link thereby
accepting multiple appointments gives rise
point for arbitration as an effective means reducing the need for both national and
to an appearance of bias on the part of the
of dispute resolution. international travel. But it is the little things
arbitrator and whether disclosure should be
that count: abolishing the use of paper
made in such circumstances. What to look out for in 2020 cups for coffee during a hearing might well
The case itself arose out of the Deepwater be a good start.
Diversity and “green awareness” are
Horizon incident. The court-appointed themes which are likely to dominate
arbitrator accepted two appointments discussion about arbitration. There is a
Jonathan Wood Naomi Vary
Consultant Partner
T +44 20 3060 6562 T +44 20 3060 6522
jonathan.wood@rpc.co.uk naomi.vary@rpc.co.ukANNUAL INSURANCE REVIEW 2020 17
International property
By Hannah Ridzuan-Allen
Key developments in 2019 faced some adjustment as further data on Drones are increasingly becoming
cyber losses and their quantum gradually the norm for carrying out property
As predicted, the property and casualty
becomes available. inspections. They allow entry into unstable
market continued to experience rate
structures and inspections of roofs
increases in 2019. There was a slight Natural catastrophe losses for 2019 and large items such as boilers without
acceleration in this trend as against the have come in below the yearly average. the construction of scaffolding and
previous four quarters. Following large The hurricane season presented some risks to workers. However, with several
catastrophic losses in 2018, insurers “strange” conditions, with all but two of jurisdictions tightening their laws, this
withdrew capacity in geographical the Atlantic Ocean storms having been could put the brakes on drone use in 2020
areas hit repeatedly by natural disasters. relatively weak and short-lived; Hurricane as insurers must ensure that their use is
Underwriters also imposed significant Dorian caused a historic tragedy in the compliant in different jurisdictions.
rate increases on accounts which had Bahamas and Hurricane Lorenzo travelled
experienced heavy losses. the furthest east of any hurricane recorded As cyber-attacks have become increasingly
at that strength. The key drivers of 2019’s sophisticated, a number of insurers and
Insurance linked security (ILS) structures
losses have been regional flooding start-ups have developed tools that
remained a hot topic. Demonstrating
and thunderstorms. assist with the modelling of the potential
their increasingly varied use, Pool Re
quantum involved in risks. These provide
launched the first cat bond to cover What to look out for in 2020 an opportunity for underwriters to back
the risk of terrorism. Elsewhere in the
up their decisions in what is still a relatively
world, IAG launched the first ILS bond in 2020 is set to be an exciting year for
new (but growing) market, and consider
the Singaporean market. However, ILS technology in the property market.
how to price cyber as an add-on to
investors suffered as a result of the large Following a number of years of investment
property policies.
losses in 2017 and 2018, and likely as a result by insurers, technologies are starting to
of this, the first quarter of 2019 was the have an impact on the day to day work of Alongside these technological
second lowest for ILS uptake in the past underwriters and claims teams. developments, we have seen optimism
eight years. about a return to profitability in 2020.
Advances in hyperlocal weather analytics
Rates are projected to continue to increase
With awareness around the potential cyber provide the opportunity for claims teams
and, as 2019 was a relatively benign year
risk loopholes in property policies having to gain a quick understanding of how likely
for losses, we may see some returns after
increased, insurers have moved to tighten insured properties are to be impacted by
a challenging few years. That said, the
their wordings. Property underwriters natural disasters and to plan and execute
property market is always at the mercy of
have not been offering non-damage cyber their response appropriately.
the weather.
cover as standard. Where it is offered, it
is for an additional premium. Pricing has
Toby Savage
Partner
T +44 20 3060 6576
toby.savage@rpc.co.uk18
Legal practices
By Simy Khanna
Key developments in 2019 in the professional negligence case which Notwithstanding objections from the Law
essentially said that there was no claim for Society, solicitors are now also able to carry
It has been an exciting year for loss of
special damages. The Claimant appealed, out ‘non-reserved’ legal work from within
chance in solicitors’ claims. There have
arguing that it was wrong to take account a business not regulated by a legal services
been two big judgments:
of the expert’s evidence because it had not regulator. They are also able to provide
Perry –v- Raleys: The Claimant argued and could not have been available at the reserved legal services on a freelance basis.
that, because of bad advice, he had lost time of the notional trial date. The Court This change is aimed at allowing solicitors
his chance to pursue a claim for special of Appeal reversed the decision. The key to work in more flexible ways and to allow
damages in his personal injury claim. The issue was not what the Claimant could clients to access solicitors without the
solicitors argued that the Claimant did prove now. Crucially, it is: “what was the extra costs imposed by a firm, but it may
not qualify for special damages and so he value of what he lost then”. also lead to different tiers of solicitors
had not been in a position to pursue that operating under different requirements
The Court of Appeal judgment seems for professional indemnity insurance. This
claim honestly.
logical: what the Claimant is getting is might result in confusion for the clients
The argument concerned the extent to damages for his loss of chance to pursue about the protections offered by the
which the Court could examine the merits the original action. Taking account of solicitor they instruct.
of the underlying claim that Perry alleged he developments after the notional trial date
had lost the chance to bring. The Supreme would be inconsistent with that. The new Codes include obligations on a
Court decided that there is a burden of solicitor to ‘put matters right’. There is also
The appeal to the Supreme Court was an obligation to notify the client that they
proof on a Claimant to demonstrate that
heard on 25 July 2019 and the judgment is may have a claim against the firm. This is
the claim they would have brought would
awaited. This area of the law will continue likely to be concerning to insurers.
have been an honest one. A Claimant
to develop.
cannot succeed by showing that he would
The Codes have been streamlined and
have brought a claim that would have been What to look out for in 2020 consolidated. They use much plainer
dishonest. A Court is entitled to determine
English. However, there is a greater use of
that issue on a full forensic examination of We anticipate that 2020 is going to be
subjective words which we fear may lead to
the facts at trial. all about regulation. New SRA codes of
interpretational confusion. There is also far
conduct came into effect on 25 November
Edwards and Hugh James: The Claimant less actual guidance. We suspect that this
2019. The old Code has been split into two:
had a potential claim for special damages. may lead to compliance challenges.
the Code for Solicitors which addresses the
A medical report obtained at that time expected standards of professionalism and A lot of work has already been done by
verified that. Due to the negligence of his the Code for Firms setting out the standards firms to prepare but these are significant
solicitors, he failed to pursue that claim. and business controls expected from firms. changes, the effects of which will be felt
The Court rejected the claim against the There are also new accounts rules. strongly over the coming years.
solicitors on the basis of an expert’s report
Nick Bird Karen Morrish
Partner Partner
T +44 20 3060 6548 T +44 20 3060 6521
nick.bird@rpc.co.uk karen.morrish@rpc.co.uk
Rhian Howell Will Sefton
Partner Partner
T +44 20 3060 6708 T +44 20 3060 6924
rhian.howell@rpc.co.uk will.sefton@rpc.co.ukANNUAL INSURANCE REVIEW 2020 19
Life sciences
By Peter Rudd Clarke
Key developments in 2019 We have started to see claims arising from People are becoming more accustomed
opioid use/over-use in the UK but it is to accessing health services remotely, at a
Insurers in the UK took note of the headlines
not clear yet what the scale of litigation time of their choosing, and paying for it.
generated by opioids litigation in the United
will be. In our view, “pinning the blame”
States. Towards the end of 2019, a first federal The law governing telemedicine is derived
on one component of the supply chain
trial was abandoned as distributors and from a patchwork of EU regulations,
appears problematic, whether that is the
manufacturers came to a $260m settlement national laws and guidance published by
manufacturer, distributor, prescribing
just hours before the trial was due to regulators. Underwriters should scrutinise
clinician or dispensing pharmacist. Opioid
commence. It remains to be seen whether providers to ensure they are compliant.
products are regulated and widely accepted
the remaining thousands of opioid lawsuits
as the best medication option in certain Insurers of companies providing a
brought by states and local governments in
circumstances. In any given case, the extent telemedicine service, such as via a website,
the United States will proceed to trial or be
to which clinicians followed up with patients will want to check that companies adhere
resolved via negotiation.
(particularly where online prescriptions to the legislation governing the supply
Although not on the scale seen in the are involved) and the extent to which of medicines over the internet. Insurers
United States, the problems over opioid manufacturers acted appropriately on of clinicians providing a telemedicine
addiction in the UK are well documented. performance data may vary and will be part service, such as doctors contracted by
Opioid prescribing more than doubled of a complex wider picture. a website provider, will want to ensure
in the period 1998 to 2018, as did the that they are compliant with their duties
Throughout 2020 the various entities in
number of Britons taken to hospital after over remote consultations and the online
the supply chain, as well as their insurers,
overdosing on opioid products. As the prescribing of drugs.
will continue to watch developments in the
risks are understood better, so regulators
United States, as well as investigations such Issues over online opioid prescribing
have started to take action. The General
as the MHRA’s, with interest. illustrate the need for prescribers, website
Pharmaceutical Council in 2019 tightened
guidelines relating to online prescribers. hosts and dispensing pharmacists to be
What to look out for in 2020
Also during 2019, an expert working group alert to the particular challenges posed
under the auspices of the Medicines and As the public grows increasingly by online consultations and remote
Healthcare products Regulatory Agency frustrated with difficulties in obtaining GP prescribing of drugs. The companies that
(MHRA) began considering steps to appointments, we expect telemedicine get it right will tap into a growing market
combat the escalating problems. to become even more popular during in 2020.
2020 and for there to be an increase in
demand for insurers to cover such services.
Dorothy Flower Pete Rudd-Clarke
Partner Legal Director
T +44 20 3060 6481 T +44 20 3060 6535
dorothy.flower@rpc.co.uk peter.rudd-clarke@rpc.co.ukYou can also read
