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Annual insurance review 2022 ADVISORY | DISPUTES | REGULATORY | TRANSACTIONS
Contents 4 Introduction 6 Global Access | Working together 8 Asia 10 Australia 12 Canada 14 France 16 Netherlands 18 Latin America 20 USA 23 Middle East and Africa 24 Offshore 26 Business line updates 28 Accountants 30 Art and specie 32 Brokers 34 Casualty 36 Claims handling 38 Contingency 40 Construction 42 Construction all risks 44 Cyber
46 D&O 49 Energy 50 ESG 52 Financial institutions 54 Financial professionals 56 General liability 58 Health and safety 60 International arbitration 62 International property 64 Legal practices 66 Life sciences 68 Medical malpractice 70 Miscellaneous professional indemnity 72 Pensions 74 Political risk and Trade credit 76 Power 78 Product liability 80 Property and business interruption 82 Regulatory 84 Surveyors 86 Technology 88 Warranty and indemnity insurance 90 Contacts
4 2022
Introduction
Hello and welcome to RPC’s Annual Insurance Review – a look back at the events that shaped the insurance
market in 2021 and a look forward towards what to expect in 2022.
In last year’s review we attempted to pick the withdrawal of unprecedented levels • continued, and the risk of growing, civil
up the pieces of the devastating impact of of government support across many and political unrest across the world,
COVID-19’s emergence. If anything, this jurisdictions will take some time to be driven in part by rebellion again COVID
year there remains a sense of waiting to revealed. A boom in insolvencies (and the lockdown measures
see exactly what the longer-term impact of rise in claims of many kinds likely to follow) • global supply chain and labour issues,
COVID will be. seems ever more probable, especially as impacted by COVID, other one-off
further lockdown measures persist whilst events and (in the UK) Brexit.
Business interruption aside, many COVID business subsidies fall away. But then again,
related claims remain nascent, only likely similar was predicted following the credit But of course the biggest growing issue,
to be fully realised once the sequence of crunch but did not ever quite come to pass. as foreshadowed in last year’s Review, was
easing and then re-imposing lockdown the increasing importance of ESG around
restrictions has been broken and the As ever with our Annual Review, you can the world and across all sectors. This year,
true financial and economic impact of jump straight to your own business class/ for example, you can read more about
the events of the last two years starts to global geographical sector for expert insurers acting as agents for imposing
become clear. At the time of writing at insights in your chosen field. Alternatively, affirmative ESG change on policyholders
the end of 2021, the emergence of the reading the Review in full will provide you and vendors; ESG claims risks arising from
fast-spreading Omicron variant has led with a complete overview of what has investors, employees and others; and
to yet further restrictions being imposed impacted the insurance market globally in regulatory and governmental intervention
around the world. It therefore appears that the last 12 months. in many jurisdictions.
the next 12 months will not be the return
to business as usual that had perhaps been This year, as well as COVID, key It’s been another extraordinary year. From
hoped for. themes include: all at RPC we look forward to working with
• the impact, across a range of sectors, of you to help you make the best of whatever
Of course, the claims environment will be challenges and opportunities await and wish
heavily influenced by the overall global big increases in cyber-attacks, especially
the use of ransomware (reported to you all a prosperous and healthy New Year.
economic outlook. High levels of corporate
insolvencies continue to be predicted, be up 25% in Asia and to have doubled
but have not yet arisen. The impact of according to the UK’s GCHQ)
Simon Laird Robert Morris Toby Higginson
Partner Partner Partner
+44 20 3060 6622 +44 20 3060 6921 +44 20 3060 6581
simon.laird@rpc.co.uk robert.morris@rpc.co.uk toby.higginson@rpc.co.uk
ANNUAL INSURANCE REVIEW 5
6 2022
WORKING TOGETHER
Working together with shared strategic objectives and
values and the collective purpose of providing clients with
Global Access to the best insurance law advice and client
service wherever in the world they might need it.
We are more than a network.
46 OF
WORLD
OVER
LAWY
ANNUAL INSURANCE REVIEW 7 FFICES DWIDE. R 2000 YERS.
8 2022
ASIA
RPC
Alex Derham | Senior Associate
Key developments in 2021 Evergrande, China’s second largest Many construction projects delayed
property developer, which has been on by COVID-19 are now back underway,
In a continuing hard market, insurance
the brink of collapse for several months, although the outlook for the construction
premium rates in Asia have increased
missed an US$83.5m interest payment insurance market remains mixed. While
through 2021, although at levels below the
due on a dollar-denominated bond. many jurisdictions across Asia continuing
global average (and with increases across
Evergrande’s debt problems pose a to see high levels of investment in large
certain lines moderating). While rate rises
systemic risk to China’s financial system scale projects, certain carriers have scaled
have remained robust in the financial
and its default is having a domino effect, back their appetite for construction risks,
lines space, we have seen property rates
with other Chinese property developers having experienced significant losses in
moderate and, for casualty, achieving
now starting to follow suit. Insurers heavily recent years.
increases has proved more challenging.
invested in the Asian real estate market,
particularly Chinese property bonds, risk The cyber market has been volatile,
Numerous large business interruption,
significant losses from the crisis. China’s with 25% of global cyber-attacks in 2021
event cancellation and trade credit claims
insurance watchdog has since issued a occurring in Asia, but with capacity
arising out of the COVID-19 pandemic
draft guideline to enhance regulation challenges and many insurers narrowing
have been resolved during 2021. However,
over insurance companies, which is likely the terms of key cover, particularly in light
the road to recovery from COVID-19 has
to mean added scrutiny and amplified of worsening claims experiences arising
been far from smooth and the broader
reporting requirements for insurers from ransomware attacks.
economic challenges are continuing
to impact insurers. In September 2021, operating in China.
ANNUAL INSURANCE REVIEW 9
As always, however, it is not doom and to December 2022 and tax neutrality market in both sectors, we should expect
gloom across the board. Despite trade is being offered for ILS vehicles until further rate increases for these high-
credit insurers still working through some December 2023. demand products, in conjunction with
significant COVID-19 related losses, the increased focus by insurers on policy terms
anticipated rise in insolvencies moving into What to expect in 2022 and pre-inception enquiries. In contrast,
2022, as governments are expected to turn other lines of insurance business can
Continuing COVID-19 restrictions in most
off the support taps, has served to further expect to see diminishing rate increases as
Asian jurisdictions, potential challenges in
drive up demand for trade credit insurance premiums stabilise.
the property market (whether related to
in Asia.
Evergrande or otherwise) in combination Political violence (re)insurers are expected
The same fear is also supporting the with global supply chain issues, rising to remain cautious amid growing concerns
sustained growth of the D&O insurance energy prices, increasing inflation and as to the potential for international
market in the region. Increased demand the withdrawal in temporary pandemic sanctions, the political uncertainty in
for D&O products has also been driven by relief measures suggest that 2022 will Myanmar and broader potential for social
the marked increase in US securities class be a bumpy ride for the Asian insurance and political unrest in various countries
actions being brought against foreign market, even without further resurgent around the region as countries wrestle
issuers. Chinese companies have been the COVID-19 outbreaks (which are, of with the economic challenges of transiting
prime target, accounting for 55% of filings course, inevitable). to a post-COVID-19 era.
against non-US issuers in the third quarter
The continued growth in cyber claims is Further growth in renewables can be
of 2021 alone.
expected to continue into 2022 as cyber expected, particularly in the solar and
Insurance-linked securities (ILS) in criminals continue to become more onshore/offshore wind spheres. Consumer
the form of catastrophe bonds also sophisticated. Asia remains an attractive awareness is also feeding mounting
enjoyed a record first half in 2021 and target, particularly given as it is set to consumer and regulatory pressure on
the market is showing no signs of losing overtake the US as the largest market for insurers to perform in accordance with ESG
momentum. The liquidity of ILS and scope data centres by 2024. principles, including being selective of the
for diversification are appealing factors. types of businesses they choose to insure,
The longer-term effects of COVID-19
In Singapore, the ILS grant scheme, particularly within the oil and gas sector.
are likely to continue in the form of
developed by the Monetary Authority Growing interest in the ESG agenda is also
insolvencies in 2022, potentially leading to
of Singapore to fund upfront costs in expected to further propel the ILS market’s
a further increase in D&O and trade credit
ILS bond issuances, has been extended long-term growth into 2022 and beyond.
claims. On the back of the current hard
CONTACTS
Mark Errington Antony Sassi Carmel Green
Partner Managing Partner, Asia Partner
+65 6422 3040 +852 2216 7101 +852 2216 7112
mark.errington@rpc.com.sg antony.sassi@rpc.com.hk carmel.green@rpc.com.hk
10 2022
AUSTRALIA
COLIN BIGGERS & PAISLEY
Jonathan Newby | Partner
A look back at 2021 The new and foreshadowed regulatory technology providers and government
changes have seen a reduction in the organisations impacting ability to carry out
COVID-19 continued to cause disruption
overall number of class actions being core operations.
in Australia during 2021. While not subject
commenced but a noticeably sharp
to the lockdowns that Europe and other In the regulatory space, 2021 saw
increase in class actions commenced
jurisdictions faced in the first half of the the insurance recommendations
without a litigation funder, including in
year, the level of normality that had been of the Financial Services Royal
the Supreme Court of Victoria where
achieved in the early months came to an Commission implemented by the
contingency fees were introduced in 2020.
end in the middle of the year following Australian Government.
significant outbreaks in New South The fall out of the combustible cladding
Wales, Victoria and the ACT (and smaller crisis continued to impact the construction Insurers started the year preparing for the
outbreaks in other states and territories) sector and its insurers. In April, the Court introduction of the new unfair contract
leading to the closure of internal boarders, of Appeal of the Supreme Court of Victoria terms regime. Long established in other
limitations on international arrivals gave judgment in various appeals brought financial areas (and in particular consumer
and lockdowns. from the orders relating to the Lacrosse credit), there were a number of instances
Apartments - the first cladding matter where insurers struggled conceptually to
COVID-19 continued to place the business apply some of the thinking behind unfair
to go through the Australia Courts -
interruption (BI) policies of many insurers contracts as it has developed in consumer
endorsing the trial judgement that found
under the microscope as test cases finance, and we await any test cases or
the building surveyor, architect and fire
proceeded through the Courts both locally announcements of enforcement action.
engineer liable 97% of the damages of the
and around the globe. A key Australian
owners losses. The outcome of this appeal, In addition, there were new design and
decision in Star Entertainment Group
which will likely be subject to an appeal to distribution obligations, the end of
Limited & Ors v Chubb Insurance Australia
the High Court, has provided guidance for the exemption of claims handling and
Ltd & Ors [2021] FCA 907 addresses two
insurers as they continue to manage claims settlement from the regulated financial
pivotal questions concerning: what
and notifications. services regime, and a new duty to take
constitutes ‘loss resulting from or caused
by any lawfully constituted authority’ Cyber-attacks have continued to make reasonable care to replace the former duty
and whether COVID-19 constitutes a news headlines in 2021, with long of disclosure for consumer insurance only.
‘catastrophe’. In this instance, the Federal lockdowns playing into the hands of threat The courts also found some teeth in the
Court ruled that insurance companies actors who take advantage of the rapid previously underutilised parts of the
were not required to indemnify Star digital transformation which has been Insurance Contracts Act which codify
Entertainment for losses incurred as a accelerated by the events of the last two the duty of good faith - and have issued
result of government imposed restrictions. years. The Australian Cyber Security Centre some interesting declarations at the suit of
(ACSC) observed that to 30 June 2021, the Australian Securities and Investment
The class action space in Australia is
there was an increase of nearly 13% from Commission to the effect that insurers had
experiencing high levels of volatility
the previous year in reported cyber-attacks engaged in inappropriate conduct.
associated with a series of targeted
resulting in losses of more than $33bn with
regulatory changes by the Federal
the insurers reporting a corresponding
Government to regulate litigation funders, Looking forward to 2022
increase in notifications and claims.
increase settlement return thresholds and The shadow thrown by COVID is likely to
reduce funder commissions. Coordinated Australia is not alone in tackling cyber- remain despite the opening of internal
changes have also been made to the attacks comprising ransomware, and external borders and the national
Corporations Act that will make it more business email compromise, phishing, vaccination rates hitting 90%. A number of
difficult for class action plaintiffs to and data breaches and in 2021 there major BI claims remain on foot and even as
succeed against companies for breaches of have been some notable cyber events we head into December, there are reports
Australia’s continuous disclosure rules. involving manufacturers, health care of others being initiated as plaintiff firms
providers, entertainment brands, gather class action members.There has also been much talk of a public a change in government then it is likely assets, and enabling an emergency hatch
inquiry or Royal Commission into the the new regulatory environment will be for government intervention into cyber
handling of COVID by Federal, State and substantially weakened with a likely return security incident responses.
Territory Governments, which will be to previous class action and litigation
watched closely by insurers in anticipation funder activity levels. Under the Ransomware Payments Bill 2021,
of claims or class actions that could entities intending to make a ransom
potentially result. Cyber-attacks will continue to be one payment (excluding those with an annual
of the top risks for organsiations and turnover less than AU$3m) will be required
Following the slew of regulatory changes cyber insurance demand will continue to to notify the ACSC of key details giving the
implemented in 2021, 2022 will be the increase. 2022 will see the introduction of ACSC clearer oversight into attacker trends
year in which insurers learns how to work a regulatory framework by the Australian and the impact on the economy.
with the new regulatory regime, and for Government around this.
ASIC to initiate some high profile licence The sector as a whole continues to face the
condition or enforcement actions to test The Security Legislation Amendment challenges of a hardening market and the
the new regime. (Critical Infrastructure) Bill 2020, which financial impacts of COVID, erratic climate
has been passed, will be split into two events and fierce competition keeping
There is expected to be continuing so that government intervention into downward pressure on pricing. There are
levels of uncertainty for the future of the cyber security incident responses can rumours of M&A activity in the sector within
Australian class action market until the be progressed urgently. The bill seeks to 2022 which could see some consolidation in
next Federal election in the first half of enhance the regulatory framework to the market. Insurers will continue to look at
2022. Should the existing government be address serious cyber security incidents innovative business models and investment
returned than the regulatory environment to infrastructure which include gas pipe in InsurTech to control costs, drive
is expected to further intensify. If there is lines, banking institutions, electricity efficiency, and maintain market share.
CONTACT
Jonathan Newby
Partner
+61 2 8281 4406
jonathan.newby@cbp.com.au12 2022
CANADA
MILLER THOMSON
Thomas R. Whitby | Partner
Mark R. Frederick | Partner
Amanda Cutinha | Articling Student
Key developments from 2021 “Core Policy Decisions” and same actions and had caused the same
government immunity harm. The court therefore held that the
2021 brought with it the continuation
As well, in 2021, the Supreme Court of negligence claim was derivative and
of the COVID-19 pandemic, impacting
Canada heard Nelson (City) v Marchi. The the insurer was not obligated to defend
insurance companies and the regulation
Court clarified the law with respect to the insured.
of insurance more broadly. In this chapter
we recap of some of the major changes what constitutes a “core policy decision”
impacting the insurance industry moving rendering a government of public Indivisible injuries
authority immune from liability. The Court The British Columbia Court of Appeal
into the new year.
specifically defined a core policy decision in Neufeldt v Insurance Corporation of
as “decisions as to a course or principle British Columbia commented on whether
Business loss coverage injuries sustained in two accidents
The COVID-19 pandemic brought with it of action that are based on public policy
considerations, such as economic, social were indivisible in nature. If injuries are
the rise of business interruption claims and
and political factors, provided they are indivisible, the damages which flowed
pandemic insurance. In MDS Inc. v Factory
neither irrational nor taken in bad faith.” from each injury cannot be assessed
Mutual Insurance Company, the Ontario
The Court went on to outline four factors separately and distinctly, leading to liability
Court of Appeal considered whether the
to be used to identify core policy decisions concerns. The Court found that, in order
insurer appellant was required to provide
including: the level and responsibilities to determine if injuries are indivisible,
insurance coverage for losses arising
of the decision-maker; the process by causation needs to be determined and, if
from an unplanned shutdown. The Court
which the decision was made; the nature only some injuries are indivisible, damages
providing broadly awaited clarity on the
and extent of budgetary considerations; must be approached through the Long v
scope of the term “physical damage” in
and the extent to which the decision is Thiessen approach.
the context of exceptions to exclusion
clauses. The Court held that the “physical based on objective criteria. As well, the
damage” exception to the exclusion clause Court noted that financial implications Dispute resolution provisions
and/or using the word “policy” are not The Superior Court of Quebec in 9369-
did not apply to economic losses caused
determinative of whether a decision is a 1426 Quebec inc. (Restaurant Bâton
by the inability to use equipment during
core policy decision immune from liability. Rouge) declined jurisdiction over a class
a shutdown. While the case did not arise
action suit against an insurer in favour
from a COVID based shutdown, this may
Duty to defend claims alleging of dispute resolution provisions in the
be relevant to COVID-19 related insurance
insurance policy, namely, mediation and
litigation claiming business interruption intentional acts
arbitration provisions.
losses moving forward. The Supreme Court of British Columbia
in Henderson v Northbridge General
Promissory estoppel and insurance Insurance Corporation considered whether Material change
an insurer had a duty to defend a claim In Dubroy v Canadian Northern Shield
In Trial Lawyers Association of British
against its insured arising from negligence Insurance Co, the British Columbia
Columbia v Royal & Sun Alliance Insurance
and assault allegations in the alternative. Superior Court considered whether
Company of Canada, the Supreme Court
The insured operated a daycare and had an individual moving out of a home
of Canada considered the application of
been accused of shaking an infant baby constituted a material change in risk such
the doctrine of promissory estoppel in
in her care. The insurer provided general that its non-disclosure warranted no
the context of a personal injury claim.
liability coverage but denied coverage coverage. The Court found that the policy
Specifically, the Court found that an insurer
on the basis of an exclusion for bodily was not void because there was no change
was not estopped from denying coverage
injury despite the negligence claim being in risk – the house was still occupied by
by its conduct before it had actual
the primary cause of action. The court family members of the exclusive owner
knowledge of material facts constituting
held that the claims in negligence and and the insurer continued to insure the
the insured’s breach of the policy.
the intentional tort of assault were not same risk.
sufficiently disparate to render the two
claims unrelated as they arose from theANNUAL INSURANCE REVIEW 13
Climate change respect of foreign insurance branches and operational, particular as climate change is
On 12 October 2021, OSFI published a bank branches (Branches) was contained said to cause weather-related flooding.
summary of stakeholder feedback in in Guideline E-4A: Role of the Chief
respect of a discussion paper entitled Agent & Record Keeping Requirements Duty to defend claims alleging
“Navigating Uncertainty in Climate and Guideline E-4B: Role of the Principal intentional acts
Change: Promoting Preparedness and Officer and Record Keeping Requirements, Looking to 2022, we see this case as
Resilience to Climate-Related Risks” respectively. OSFI has now consolidated making it clear that deliberate conduct
released on 11 January 2021. This discussion its guidance in respect of foreign insurers exclusionary language will have to be
paper invited federally regulated financial and banks. made more distinct if Underwriters wish to
institutions, federally regulated pension avoid liability.
plans and interested stakeholders to What to look out for in 2022
respond to specific questions developed Indivisible injuries
by OSFI regarding climate change-related Business loss coverage We see more potential in the “invisible
risks and the development of guidance to We see that more COVID-19 litigation
injury” category particularly with regard to
address such risks. will be addressed by Canadian Courts as
brain damage as more is understood about
damages crystallise and the Courts begin
the nature of brain trauma. The topic is
Foreign insurers to review these cases in earnest. We expect
fast becoming one of interest amongst the
On 29 March 2021, OSFI released a letter a number of decisions will be summary in
personal injury bar.
indicating that it will be revising the nature and that a great deal of guidance
vested asset regime for foreign insurance will be taken from the initial cases on how
courts in general will deal with these issues.
Dispute resolution provisions
companies operating as branches in We expect to see a renewed emphasis on
Canada. The Insurance Companies Act insurance providers inserting well-drafted
(Canada) requires foreign insurance Promissory estoppel and insurance dispute resolution provisions in their
companies to maintain in Canada an Looking forward to 2022, we envision
policies especially in light of the rise in
adequate margin of assets in respect of that insurers may be more ready to issue
class actions against insurance providers
their insurance business in Canada. The reservations in cases where they might
amid COVID-19.
Canadian branch of the Company must not have done so previously, particularly in
vest these assets in trust pursuant to OSFI cases that have potential for prior notice
and disclosure issues.
Material change
Standard Form Trust Agreement (Form
For 2022 we note that the problem of
541) in a Canadian financial institution
unoccupied dwellings continues to be
selected by the Branch. “Core Policy Decisions” and significant for insurers and we suspect
government immunity the move may be to require warranties
On 28 June 2021, OSFI issued its final
In 2022 we expect that there will be more from insureds as to occupancy so as to
version of Guideline E-4: Foreign Entities
discussion and potential litigation on emphasise the need to not leave dwellings
Operating in Canada on a Branch Basis
Municipal Liability matters and whether unprotected for prolonged periods
(Guideline E-4). Previous guidance in
infrastructural decisions were policy or of time.
CONTACTS
Tom Whitby Mark Frederick
Partner Partner
+1 416 595 8561 +1 416 595 8175
twhitby@millerthomson.com mfrederick@millerthomson.com14 2022
FRANCE
HMN PARTNERS
Romain Schulz | Lawyer of counsel
Key developments in 2021 This position is open to criticism but Cour the decisions rendered by various courts
de cassation nevertheless reaffirmed it on (of first instance and of appeal) in France
Last year, we mentioned a decision
26 November 2020 and then on 27 May leave an impression of chaos.
rendered on 24 September 2020 by Cour
2021. The ten identical decisions rendered
de cassation (French Supreme Court) Considering this, some insurers, among
on 27 May 2021 are all the more noticeable
regarding aggregation of claims in PI which a prominent French insurer, initiated
that in order to quash the decision of the
insurance, in case of breach of the duty to last summer a process of amicable
lower court, Cour de cassation raised of its
inform and advise committed by an insured settlement which met quite a success
own motion the issue of aggregation which
toward many clients. Cour de cassation (the offer has been accepted in 80% of
was not in the grounds of the final appeal.
decided that “provisions of article L.124- the matters).
1-1 of French Insurance Code confirming We also mentioned last year that the issue
claims aggregation are not applicable to of coverage of operating losses when there Still, the issue of capacity on the insurance
liability incurred by a professional in case is no physical damage, which was already market for this kind of risk remains, which
of breach of the duties to inform and to an issue the year before, has been renewed poses the question of sharing the risk
advise, these duties being individualised and rendered more accurate than ever by between insurers and the State. Some
by nature and excluding that there is the COVID-19 pandemic. consider the solution could be a mix
a technical cause, under article L.124- including compulsory insurance and an
1-1, allowing to deem them a unique The question of coverage of operating “exceptional disaster” guarantee fund,
damaging event”. losses sustained by professionals following similar to the “natural disaster” fund.
the lockdown received various answers andANNUAL INSURANCE REVIEW 15
What to look out for in 2022 Act is currently discussed before French involving insurance, insofar as classical
Parliament, but it is not as ambitious as one conditions are usually not met. But rules
In France too, climate change has become
may have expected. might be bent as they have been in order
a major concern regarding insurance.
to compensate environmental harm. It is
Regarding third party insurance, presently also possible that climate change litigation
Regarding first party insurance,
the risk appears quite difficult to is based upon classical grounds of liability
multiplication of natural disasters and
apprehend through civil liability. Insurers that are not strictly related to climate
increase of the amount of losses question
are still trying to figure out how climate change, like tort liability, liability arising
sustainability of the current system of
change may give rise to a civil liability from environmental damage, D&O...
insurance and State guarantee fund. An
CONTACT
Simon Ndiaye Gérard Honig Romain Schulz
Partner Partner Lawyer of counsel
+33 1 53 57 50 41 +33 1 53 57 50 37 +33 1 53 57 50 50
sndiaye@hmn-partners.com ghonig@hmn-partners.com rschulz@hmn-partners.com16 2022
NETHERLANDS
KENNEDY VAN DER LAAN
Marit van der Pool | Attorney at law
Peter van den Broek | Parter, Attorney at law
A look back at 2021 We also have a very active interest group Looking forward to 2022
for shareholders that keep on pursuing
Property & BI claims against companies. Not only for D&O
The new model for bourse conditions lost shareholder value, but also in relation Now that we know that there is no
for Property & BI policies is released to big bankruptcy proceedings. The most quick way out of the pandemic, specific
this year. These VMZB 2021-conditions interesting one is the IMTECH case, one of sectors still face greater insolvency risks
(and matching schedule and clarifying the biggest in the Netherlands. and inherent risks of D&O claims. We
document), that are intended to replace also see an increasing social pressure on
the commonly used NBZB and/or NBUG A crucial part of some of these new types corporations to take their responsibility
(both dating from 2006), can already be of litigation is litigation funding. In addition in ESG issues. A group of legal professors
found on the VNAB website in Dutch here. to two local funders (incl Redbreast), other opted to include this corporate
One of the key changes is that the VMZB funders have flocked to the Netherlands responsibility in the Dutch Civil Code. In
2021 are of a modular design/structure, and even started their own law firms (eg the current system, D&Os are obliged by
with separate modules for physical loss Hausfeld). We also see US firms moving law to act in the interest of the company.
and BI, in line with current market practice into the market. The interest of the company is however, in
and needs (also re automation). Further, Environmental litigation is obviously the end, aimed at maximalisation of profit.
the language has been adapted to normal one of the most interesting changes, The group of legal professors argue that
language use anno 2021. Sentences are as recently witnessed by the Shell case. this focus on profit is damaging to society
shorter and the layout is clearer, making This movement got kick-started by the and therefore opt to include an obligation
the conditions easier to read. And, of Urgenda case against the State from a for directors to act not only in the interest
course, the conditions have been adapted few years ago and has now developed of the company, but to also make sure
in terms of content to comply with current into a ‘movement’ of sorts where various the company acts as a responsible citizen.
legislation and regulations, and also to get other actors will be attacked. Also note Whether ESG responsibilities will in fact
in line with current business practices. that this seems to coincide with activist be included in the Dutch Civil Code is yet
shareholders that push for greener to be seen, but we do already see that
Class actions companies from within (again, Shell is a civil courts take such responsibilities into
We have a new regime that is currently good example). Note that the majority of account in their assessment of claims. The
being applied/tested in practice with some these cases do not involve damages, but Shell Climate case is an example of this.
20-odd cases (and growing). Various diesel court orders to ensure compliance with Insurers fear that this trend of activistic
gate cases (VW, FiatChrylser, Mercedes), climate targets. litigation will lead to D&O claims in the
Oracle & SalesForce (data privacy), actions (near) future.
against the Dutch State (anti-conception D&O
pill, environment, ethnic profiling, As (major) insolvencies caused by the Insurability of climate
fundamental rights, etc), IP infringements, COVID-19 pandemic did not emerge in the change damages
bankruptcy proceedings, Stop Online scope we expected in the Netherlands, The Authority for the Financial Markets
Shaming, etc. D&O insurers did not receive COVID (AFM), the Dutch conduct supervisor for
related claims in the magnitude they Dutch financial enterprises and financial
After the UK, the Netherlands has become
feared. This fear, however, did cause a service providers, issued a report on
the battle-ground for follow-on litigations
further hardening of the D&O market. climate change related losses getting more
regarding EU competition law cases (ie
Prices (again) rose drastically, not just and more uninsurable in the Netherlands,
damages in civil courts). We have several
because of COVID, but also because of and the need for insured parties to be
big cartel cases pending in the courts and
scarcity in capacity and new risks such as aware of that. The report focuses on
are involved in one of them (Deutsche
cyber and climate change related claims. consumers, but also has relevance for the
Bahn pre-stressed steel case). This flurry
business (co-)insurance market.
of cases has led to an expansion of certain
courts with dedicated chambers.The report itself, and a short introduction
to it, can be found (in Dutch) on the AFM
website: Schade door klimaatverandering
steeds vaker onverzekerbaar | oktober |
AFM Professionals.
In summary, the AFM urges insurers to
clearly inform policyholders/insureds on
increasing cover limitations as a result
of climate change. In addition, AFM also
suggests to both insurers as well as the
Dutch government to take appropriate
action to encourage insurability of climate
risks in the future, including the option of
mandatory insurance or the creation of
collective (re-)insurance pools.
CONTACTS
Marit van der Pool Peter van den Broek
Attorney at law Partner, Attorney at law
+31 20 5506 838 +31 20 5506 669
marit.van.der.pool@kvdl.com peter.van.den.broek@kvdl.com18 2022
LATIN AMERICA
RPC
Alex Almaguer | Latin America Insurance Practice Lead
Key developments in 2021 throughout Latin America regarding For example, we expect to see an increase
coverage for “Extended BI”. in demand for insuring renewable energy
The year 2021 has been marked by the
projects like solar, water and wind, the
COVID-19 pandemic and the lockdown (Re)insurers looked at incorporating most available natural resources in Latin
restrictions imposed to stop the spread of exclusions to address COVID-19 in policies America. So far, most projects in the region
the virus. Latin American countries have going forward. New exclusions in most are at a small and medium sized scale.
seen some of the highest levels of infection jurisdictions are still to be approved by the
and mortality from COVID-19. insurance regulator, however. Local governments have started
introducing new construction regulations
One of the first questions which arose was
whether having Coronavirus could trigger
What to look out for in 2022 aimed at increasing energy efficiency. This
will have a direct impact on the adjustment
your property policy, for example, whether The COVID-19 pandemic has disrupted
of losses in circumstances where repair,
having COVID-19 present on your property many sectors of the global economy and
rebuild and replace costs may increase
could constitute physical damage. Latin America is not an exception. The
in order to fit the new construction
impact of COVID-19 and in particular its
Generally speaking, it was widely accepted standards. In our experience, coverage for
economic effect is going to continue into
that Coronavirus cannot cause physical improvements is not always clear allowing
2022. The appearance of new variants
damage and most insurance regulators and scope of interpretation.
is of concern in circumstances where
legal courts appeared to take that view in some Latin American countries with As regards the construction and operation
the region. large populations do not have access to of highly-polluting projects such as coal
The vast majority of COVID-19 related the vaccines. power plants, international (re)insurers
claims were pursued in the form of are now more than ever reluctant to
Whilst COVID-19 is going to take up a
business interruption losses as a result of provide coverage for these projects.
significant part of the region’s agenda,
COVID-19 lockdown restrictions where The lack of insurance, in our view, will
climate change continues to be a key
there may be no physical damage typically prompt governments in the region to
theme and we expect the region’s
required under all risks property policies. discourage the continued operation of
attention will eventually be focused on net
and/or investing time, funds and resources
Often, however, there is covered physical zero policies.
in these.
damage and the Coronavirus restrictions Following the United Nations Climate
have extended the BI. Insurers sought Change Conference held in Glasgow,
to adopt a consistent approach across countries are being asked to come forward
different jurisdictions, which, to date, has with ambitious 2030 emissions reductions
not been possible. In general, insurers have targets that align with reaching “Net Zero”
taken two different approaches. by 2050.
Some insurers have taken the approach Whilst some countries in Latin America
that the lockdown restrictions are outside have started making internal arrangements
the insured’s control and if there is a valid to achieve carbon neutrality by 2050,
physical damage claim, the subsequent BI including Argentina, Chile, Panama and
(including the “Extended BI”) should be Uruguay, the largest economies, such as
covered as well. However, there are also Mexico and Brazil, still depend heavily on
some insurers who take the view that that
it is too harsh for insurers to be exposed
fossil fuels. CONTACT
to an un-limited BI (or an extended BI) not The policies implemented by companies Alex Almaguer
directly linked to the physical damage. world-wide towards a low carbon future Latin America Insurance
will also have a direct impact on the Practice Lead
It is still unclear whether insurers will insurance market in Latin America. +44 20 3060 6371
be able to adopt a consistent position alex.almaguer@rpc.co.uk20 2022
USA
HINSHAW & CULBERTSON LLP
Scott M. Seaman | Pedro E. Hernandez | Co-Chairs Global Insurance Services Practice Group
Key developments in 2021 and 82 sue and labour. More than 450 cases California Consumer Privacy Act, California
were filed as putative class actions and 717 residents voted in November to approve
The COVID-19 pandemic again was a
cases include allegations of bad faith. the California Consumer Privacy Rights Act
dominant issue in 2021, which featured
(CPRA), which further expands consumer
a return of social inflation, considerable At the trial court level, insurers have
privacy rights. The CPRA also creates a state-
cyber and security activity, and a significant prevailed in almost 75% of the rulings on
wide privacy agency that will be charged
increase in attention to sustainability. motions to dismiss in state courts and nearly
with enforcement of privacy laws. This likely
95% of the rulings by federal courts, mostly
will lead to increased enforcement actions
ESG/sustainability on the grounds that the virus claims do not
for privacy violations in California.
Environmental, social and governance involve “direct physical loss or damage” to
(ESG) criteria or standards – often referred property as required under most US policy The Illinois Supreme Court found that
to simply as sustainability – are having a wordings, governmental orders do not a claimed violation of Illinois’ Biometric
significant impact on all sectors, including, constitute loss of property, and/or virus Information Privacy Act fell potentially
and perhaps particularly, the insurance exclusions preclude coverage. There are within the coverage of businessowners
and financial sector. First and foremost, numerous motions to dismiss outstanding liability policies affording personal and
insurers are focused on their own practices and many appeals pending. The first six advertising injury coverage. The plaintiff in
and operations. They are setting and appellate court rulings have all come from the underlying suit alleged she purchased a
implementing goals regarding their own US Circuit Courts of Appeal, with insurers membership from the policyholder, a salon
emissions, carbon blueprints, diversity prevailing in each case in decisions rendered that granted her access to other salons.
and governance. Insurance companies are by the Sixth, Eighth, Ninth and Eleventh Enrolling in the programme required that
being viewed – with increasing frequency Circuits (involving the laws of ten states). the plaintiff have her fingerprint scanned
and severity – as agents for imposing The first state appellate court decision, in order to verify her identity. Because the
affirmative ESG change on other entities from California, resulted in a victory for the policies did not define “publication,” the
such as their policyholders and vendors. The insurer. There have been numerous federal court turned to the dictionary definition
underwriting, pricing, investment, claims and and state legislative proposals addressing and case law, and held that “publication”
business practices of insurance companies COVID-19 coverage, but to date none have has at least two definitions and means
are under increased scrutiny, both internally become law. both the communication of information to
and externally. State regulators and rating a single party and the communication of
agencies are laser focused on ESG. The Cyber-insurance information to the public at large.” As such,
Biden administration is implementing an To date, the vast majority of cyber coverage the salon’s disclosure of fingerprint data to
“all of government” focus on ESG, with the decisions have involved traditional first- another party constituted a “publication.”
Federal Office of Insurance poised to increase party, third-party and crime/fraud policies. The court the held the violation of statutes
the federal regulation of insurance, using Claims under those policies commonly exclusion did not bar coverage for the claim
climate change as a jumping-off point. ESG are referred to as silent cyber claims. A since BIPA was dissimilar from the statutes
factors are driving losses and litigation with key decision under commercial crime enumerated in the exclusion. Subsequently,
increasing frequency. and fidelity coverage was rendered by the a Massachusetts federal court held that
Indiana Supreme Court. Most insurers in a broader exclusion barred coverage for
COVID-19 business interruption and the cyber-insurance market have now BIPA claims.
other pandemic coverage litigation issued several iterations of cyber-specific
The issuance of various governmental policies. Cyber-insurers experienced Civil unrest, riots, and strikes
orders requiring businesses to temporarily an increase in claim activity, driven Although 2021 did not see the
modify or close their operations led to an primarily by ransomware, often coupled unprecedented protests and civil unrest
almost immediate avalanche of claims and with data extraction, and business email activity that was witnessed in 2020 in the
lawsuits involving first-party commercial compromise events. wake of demonstrations in response to
property policies. By 1 November 2021, there the killing of George Floyd, the activity
have been approximately 2,062 COVID-19 Privacy violations continued in 2021. Demonstrations over
coverage cases filed, with 1,863 involving In the absence of comprehensive federal climate change, police brutality, criminal
business interruption, 1,680 extra expense, laws, individual states continue to adopt trials and labor strikes have been on the
1,600 civil authority, 190 ingress/egress, their own privacy laws and regulations. radar for insurers and policyholders. Civil
106 contamination, 86 event cancellation, Despite the 2020 enactment of the unrest – coupled with the defund the policeANNUAL INSURANCE REVIEW 21
movement – has produced a variety of abuse epidemic in two Ohio counties. This by adjudication. It also affirmed the trial
losses for which coverage has been sought marked the first time a jury has weighed in court’s application of the “larger loss” rule
under first-party property, third-party on the controversial “public nuisance” legal as opposed to the “relative exposure” rule
liability, and SRCC (strike, riot, and civil theory at the heart of many similar suits to defence costs and costs of settling one of
commotion) policies. nationwide in the context of opioids. the two underlying matters.
Previously, several significant settlements
Lead paint What to look out for in 2022
reached, including pharmaceutical
Coverage issues relating to the US$400m-
distributors’ US$215m settlement with two Social inflation and ESG will continue to
plus lead paint abatement fund involving
Ohio counties, the distributors’ US$1.179bn dominate in 2022.
three lead paint manufacturers are being
settlement with the State of New York and Additional appellate and trial court
addressed in three separate coverage
some political subdivisions, Johnson and COVID-19 decisions will be rendered, with
actions. The courts have reached
Johnson’s US$230m settlement with the a decrease in the number of new business
different conclusions in each on motions
State of New York, and a US$26bn global interruption claim filings expected.
for summary judgment. The California
settlement between drug distributors and
coverage action involving ConAgra – in Cyber and privacy claims will continue
a group of state attorneys general in the
which the trial court granted insurers’ to mount. Silent coverage decisions will
National Prescription Opioid MDL.
motion to dismissed based California’s continue to be rendered with decisions
known loss statute – is on appeal.
Disgorgement, D&O, and securities under cyber specific policies expected.
Long-tail claims – contribution law Civil unrest, riots, and strikes are likely to
New York’s highest court reversed an remain the major political risks in the US.
among insurers
intermediate appellate court ruling and
Traditionally, Florida courts did not allow Cyber attacks, data loss, regulatory risks,
held that a US$140m settlement payment
contribution claims among liability insurers health and safety, COVID-19, ESG, climate and
by J.P. Morgan Securities Inc.’s predecessor
for defence costs. Fl. Stat. § 624.1055 was employment claims likely will remain among
to the U.S. Securities and Exchange
enacted to expressly provide that courts the leading D&O emerging risk areas.
Commission was not an uninsurable penalty.
shall allocate defence costs among liability
The court concluded that the insurers Although most special purpose acquisition
insurers that owe a duty to defend the
failed to prove the disgorgement payment company (SPAC) securities class action
policyholder against the same claim, suit
– “a component of the SEC settlement lawsuits are filed after the de-SPAC
or other action “in accordance with the
that serves compensatory purposes and transaction has been completed, more suits
terms of the liability insurance policies”. The
was measured by the profits wrongfully are being filed before the merger becoming
statute does not apply to motor vehicle
obtained and losses caused by the alleged effective. In addition to merger objection
liability insurance or medical professional
wrongdoing” – fell under the exclusion for lawsuits, more full-blown 10b-5 class actions
liability insurance, but now brings Florida
“penalties imposed by law.” are being filed. The trend of SPAC-related
within the majority of states permitting
contribution of defence costs. On June 21, 2021, the U.S. Supreme Court state court actions being asserting as
issued its decision in Goldman Sachs state law causes of action rather than
Opioids coverage holding that, at the class action certification federal securities law violations likely will
In the wake of the nationwide opioids stage, a court may consider whether a continue, with counsel fees being a major
epidemic, various state and local company’s alleged misstatements were too consideration. The future of SPACs remains
governments sued numerous entities generic to have impacted its stock price. somewhat uncertain.
involved in the manufacture, sale, The decision is expected to make it more
distribution and prescription of opioid difficult to certify a class action in suits
pharmaceutical products. Facing staggering alleging securities fraud based on generic
potential liabilities, these entities have company statements.
turned to their insurance companies for
coverage under CGL and other policies. The Delaware Supreme Court in the Dole
case ruled Delaware law governed the CONTACTS
November was a key month in the excess D&O policy even though most
litigation as the Oklahoma Supreme contacts were in California, perhaps Scott Seaman
Court overturned a US$465m judgment representing the court’s desire to maintain Partner
that Johnson & Johnson sustained in the Delaware’s status as the home to more +1 312 704 3699
nation’s first opioid trial. Also, a California US companies than any other state. The sseaman@hinshawlaw.com
judge handed a complete victory to drug court ruled that the profit/fraud exclusion
manufacturers after the nation’s second did not apply on the narrow ground that Pedro Hernandez
opioid trial. The third trial did not go well one of the two underlying matters was Partner
for defendants, with pharmacy companies resolved by settlement and, therefore, did +1 305 428 5043
CVS Health, Walmart, and Walgreens being not satisfy the requirement of the exclusion phernandez@hinshawlaw.com
found liable for contributing to an opioid that the underlying matter be resolvedANNUAL INSURANCE REVIEW 23
MIDDLE EAST AND AFRICA
RPC
Hugh Thomas | Senior Associate
Holly Slowther | Trainee Solicitor
Key developments in 2021 products will be available directly to Europe, and Asia. Unsurprisingly, those
customers. South African consumer growth projections have been impacted
Middle East insurers such as Naked and Pineapple as a result of the pandemic. However,
In last year’s Annual Insurance Review are setting the benchmark for digital McKinsey & Company have predicted that
we predicted that investment in the insurance platforms on the continent. In the impact will simply delay rather than
renewables sector, and divestment in 2021 the latter secured further funding for alter the pattern and potential for future
hydrocarbon industries, would continue expansion and growth overseas, including growth. To achieve that level of growth,
at a pace in 2021. That trend has continued its partnership with Travelers Insurance in they note the importance of increasing
to be borne out, with the Middle East the US. access through digital innovation and
Energy Transition Report published by wider distribution. The pandemic has
MEED reporting that no contracts were What to look out for in 2022 helped accelerate that trend by driving
awarded for oil-powered or gas-fuelled demand for digital and remote channels.
power stations in the Middle East and Middle East This is expected to continue beyond
North Africa region in the first half of 2021. The pandemic has spurred on further the pandemic.
By comparison, approximately US$2.8bn of investment in green technology and
renewable energy contracts were awarded sustainable projects and momentum
during the same period. surrounding environmental, social, and
governance financing. In April 2021
Following up on its plans to invest up a survey of Middle Eastern CEOs by
to US$50bn in the renewable sector by consultancy firm PwC found that 46%
2023, in 2021 Saudi Arabia announced its of regional respondents said their aim
intention to generate 50% of its energy would be to increase investments in ESG
from renewables by 2030. With only 1% of and sustainability initiatives over the next
the Kingdom’s energy currently coming three years as part of their post-pandemic
from renewables that target is ambitious, transformation planning.
but that ambition is matched by the level
of investment which has been committed. With the region’s ambitious targets for
Other Middle Eastern countries have renewable energy generation, huge
followed suit, with the UAE aiming to reach investment in the technologies required
the same 50% target by 2050. to achieve them can be expected in 2022
and for the next decade. Having some of
Africa the highest solar irradiation levels in the
In 2021 we predicted that investment in world, the Middle East in particular is likely
insurer technology and digitisation of to attract significant investment in solar
insurance would continue to increase. The based technologies. An example of this
African Continental Free Trade Agreement is evolving PV (photovoltaic) technology,
(AfCFTA) came into force in January 2021. It such as bifacial PV cells, which offer greater
is expected that this will make it easier for power output than standard monofacial PV
InsurTech start-ups to do business across cells, producing solar power from direct
the continent by harmonising regulation sunlight on one side and reflected light on
and creating uniform tariffs. the other simultaneously.
CONTACT
Both start-ups and existing operators Africa
across Africa are reported to be in the Toby Savage
Before the onset of the pandemic, the
process of either raising investment for, Partner
African insurance market was expected to
or actively developing, digital platforms +44 20 3060 6576
grow by 7% annually between 2020 and
through which a wide range of insurance toby.savage@rpc.co.uk
2025, a faster rate than in North America,24 2022
OFFSHORE
RPC
Tim Bull | Partner
Key Developments in 2021 beneficiaries under trusts or to carry out What to look out for in 2022
proper due diligence on clients. Recently,
The offshore world is dominated by tax, The continued relocation of ultra high net
the Cayman Islands Monetary Authority
trusts and transparency. Of long-term worth individuals (UHNW) is expected
imposed AML obligations on Maples
interest is the decision by the G20 to sign to be the focus as it has done in previous
Group who in turn has sought to have the
off on 15% Global Minimum Corporate tax years. Cayman and Jersey have been
decision judicially reviewed. CIMA has
rate. This could have a significant impact particularly active in marketing the
called the press release issued by Maples as
on incoming business to the offshore benefits of the UHNW set relocating to
“inappropriate, professionally irresponsible
jurisdictions of Cayman, BVI, Channel a low tax country. Also being attracted
and crafty”!
Islands and elsewhere. are businesses in the Fintech, blockchain
The judicial review proceedings look set and cryptocurrency spaces. Legal and
The local regulators are also showing other professional advisor firms are, in
to be a hard-fought battleground with the
their teeth against leading Trust and law turn, seeking specialists in these areas.
regulator making it clear it will enforce
firms in offshore jurisdictions, especially This could pose risks of claims arising out
AML obligations in order to preserve
relating to Anti Money Laundering issues. of these relatively unknown markets and
the reputation of Cayman’s financial
Intertrust was fined $4.2m in Cayman for related products and services.
services sector.
AML breaches, essentially failure to identify
CONTACT
Tim Bull
Partner
+44 20 3060 6580
tim.bull@rpc.co.ukYou can also read
