Annual insurance review 2023
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Annual insurance review 2023 ADVISORY | DISPUTES | REGULATORY | TRANSACTIONS
Contents Page 4 Introduction 6 Global Access | Working together 8 Asia 10 Australia 14 Canada 16 France 18 Netherlands 21 Latin America 22 USA 27 Middle East and Africa 29 Business line updates 30 Accountants 32 Art and specie 35 Brokers 36 Claims handling 38 Climate and biodiversity risk 40 Construction 43 Construction (all risks) 44 Contingency 46 Cyber 49 D&O 50 Energy 53 Financial institutions
Page 54 Financial professionals 56 General liability 58 Health and safety 61 Intellectual property (IP) 62 International casualty 64 International property 67 Legal practices 69 Marine and shipping 70 Media 72 Medical malpractice 75 Miscellaneous professional indemnity 76 Pensions 78 Political risk and trade credit 80 Procedure, damages and costs 82 Product liability and recall 84 Property and business interruption 86 Restructuring and insolvency 88 Surveyors 90 Technology 92 Toxic tort and legacy exposures 94 Warranty and indemnity (W&I) 96 Contacts
4 2023
Introduction
Robert Morris | Partner
Welcome to RPC’s 2022/2023 Annual Insurance Review, where we herald
the start of a new year by looking back at the key developments for the
insurance market in the last 12 months and hypothesising on what to
expect in the year to come. As always, the Review looks at the trends
across key lines of business and also jurisdictionally, with great insight
from our Global Access partner firms.
The clearly dominating theme of this sector, another common theme this Unsurprisingly the key areas impacting
year’s Review is ESG – especially the year relates to how many years of rising the UK are also being felt further afield
battle against climate change, both how markets and ultra-low interest rates has with climate change and environmental
it is impacting the insurance market now emphatically ended. With the war challenges again being highlighted as
and how the market can be a force for in Ukraine and increasing economic areas insurers need to be wary of in 2023.
positive change. Across the various sector headwinds vexing global policymakers, As you will see from reading the Review,
and geographical updates, you will read economic volatility promises to be the many countries are embarking on their
how mixed public/private initiatives are “new normal” in 2023. own sustainability journey as well as joining
providing solutions to cover those at forces to make a difference globally. The
greatest risk of climate disasters; how In the UK, corporate insolvencies have role of insurance in realising these global
green tech and sustainable project been rising sharply in 2022 albeit against targets cannot be understated.
investments are booming; how the the backdrop of record low insolvency
insurance market is acting as a positive during the pandemic. By June, they had It’s been another extraordinary year for the
force for change; and how various reached their highest quarterly level since insurance industry, we hope you find the
insurance industry wide initiatives are 2009. Of course, economic downturns and review useful and if you have any questions
seeking to drive that change. high levels of insolvency often drive claims on any of the topics raised, please do
activity, and given the expectation that not hesitate to get in touch with the
ESG as a source of claims is also a common many of the world’s leading economies authors directly.
theme this year, including the growing will tip into recession in 2023 (with the
risks of “greenwashing” claims as national UK’s recession projected to be one From all at RPC we look forward to working
and international regulatory reform in of the worst on record) many sectors with you to help you make the best of
this area is looking to drive broader ESG anticipate increased claims activity in the whatever challenges and opportunities
transparency and good governance. coming years. await and wish you all a prosperous and
healthy New Year.
In addition to reading how ESG is Thanks in particular to our Global Access
impacting the insurance market from partners for once again providing
Africa through to the Warranty & Indemnity international insights from their markets.
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.ukANNUAL INSURANCE REVIEW 5
6 2023
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.
43 OFFICES
WORLDWIDE.
OVER 2000
LAWYERS.ANNUAL INSURANCE REVIEW 7
8 2023
ASIA
RPC
Alex Derham | Senior Associate
Key developments in 2022 construction sector, and (together credit insurance. The real estate crisis in
with the adoption of infectious disease China has continued, with the Evergrande
Overall, insurance premium rates have
exclusions) meant that insurers received property development group still in the
continued to increase in Asia in 2022
fewer COVID-19 closure related business process of restructuring following its 2021
across many lines of business, however at
interruption and event cancellation default on a US$83.5m interest repayment.
significantly lower levels than seen in late
claims. However, the war in the Ukraine While the Chinese government is
2020 and 2021. Asia insurance premium
has affected the already stuttering global overseeing its rescue and seeking to quell
rate rises were again much lower than the
economy bruised by the effects of the fears of a disorderly collapse, the top 100
global average (with the exception of India,
pandemic and added to supply-chain Chinese property developers still saw sales
which saw a double digit rise in gross direct
disruptions, increased energy prices (both plunge by 40% in 2022. Significant losses
premiums underwritten across the non-
feeding into claims inflation) and increased in the Chinese property market therefore
life insurance sectors). Rate rises in the
geopolitical risk. continued to affect insurers invested in the
financial lines and cyber space remained
Asian real estate market.
among the strongest, though still at a In China, the zero COVID-19 policy saw
slower pace to 2021. continued restrictions and lockdowns The Insurance Authority in Hong Kong
across the country, which slowed again amplified enforcement actions
Most jurisdictions in Asia (with the
economic growth and affected foreign against rule-breaking insurers issuing a
exception of China and Hong Kong)
trade. In an effort to counter the slowdown reprimand and fine of HK$7m to Metlife
saw the significant easing or removal
in foreign trade, the Chinese government and an affiliate in January 2022 for several
of COVID-19 measures in 2022, which
in early 2022 stepped up support for export violations of Hong Kong’s anti-money
in turn eased supply chain issues in theANNUAL INSURANCE REVIEW 9
laundering laws. A potent reminder to What to expect in 2023 While the political violence market showed
all insurers to ensure that have in place signs of contraction in 2022, with insurers
Across most product lines, inflation,
effective anti-money laundering and carefully reviewing their aggregate
supply-chain disruptions, and geopolitical
counter-terrorist financing controls exposures, terms and pricing adequacy,
risk (together with the increasing cost
and procedures. current global political/economic
of outwards reinsurance protection) are
conditions and conflicts are likely to lead
Asian organisations experienced the expected to keep pushing insured losses
to increased pricing for political violence
most cyberattacks in the world in the and premium rates higher in 2023.
and terrorism insurance globally.
third quarter of 2022, with an average of
Continued growth in the cyber sector is
1,778 weekly attacks per organisation. The The war in the Ukraine, the associated
expected in 2023, with estimates that a
prevalence of cyberattacks continues to energy crisis and the increasing number
significant majority of all cyber risks still
focus attention on the need for adequate of global catastrophes linked to climate
remain uninsured (some reports say as
cyber insurance and cyber security, change has accelerated the growth in
high as 90%). The pressure on corporates
causing continued growth in the sector. As demand for renewable energy and 2023
to adequately protect data is also expected
do changes in legislation with Thailand and will see more renewable energy projects
to increase with the effect of new or
Indonesia recently having introduced new coming online (and more funding for the
bolstered data protection laws in a number
data privacy laws, and the Singaporean construction of wind and solar projects),
of countries expected to take effect.
High Court recently clarifying that the particularly in the solar and onshore/
right to private action exists under the While trade credit insurance demand and offshore wind spheres.
Singapore data protection legislation. capacity increased in 2022, underwriters
Finally, with the announcement of
may see increased claims in 2023 with
While insolvencies in 2022 have not the launch of the market’s first cyber
reports by Singaporean businesses of a
materialised to the levels which many catastrophe bond, backed by Insurance-
50% increase in bad debts that must be
had anticipated, economic uncertainty linked securities (ILS) investors, we expect
written off in 2022 as compared to 2021.
has meant that the demand for trade to see further growth in the catastrophe
credit insurance in Asia has on average In the D&O space in particular, high bond market in 2023 and beyond.
continued to increase. In response, levels of inflation, insolvencies (which are
insurers are increasing their capacity for expected to rise by 19% globally), slow
trade credit insurance and creating greater economic growth, cyber risks and ESG
competition in the market. concerns top the list of key risk trends
for 2023.
CONTACTS
Mark Errington Antony Sassi
Partner Managing Partner, Asia
+65 6422 3040 +852 2216 7101
mark.errington@rpc.com.sg antony.sassi@rpc.com.hk
Iain Anderson Carmel Green
Partner Partner
+65 6422 3050 +852 2216 7112
iain.anderson@rpc.com.sg carmel.green@rpc.com.hk10 2023
AUSTRALIA
COLIN BIGGERS & PAISLEY
Jonathan Newby | Partner
Cathryn Prowse | Partner
Keith Bethlehem | Partner
A look back at 2022 and individuals alike. Australia has seen policy be limited to advice on products
a number of high profile data breaches within the list.
Australia has not been immune to the
throughout 2022, including Medibank
disruption and uncertainty that many The construction industry faced both
and Optus, which impacted close to 40%
countries are facing both locally and significant commercial pressure and a
of Australia, bringing the vulnerability of
globally. While the threat of COVID-19 hard insurance market. The increased
personal data and the reality of cyber-
infections is no longer the number material and labour costs, global supply
crime into the headlines.
one concern for Australians and their chain issues and subcontractor insolvency
governments, it has been replaced by In the courts, ASIC v RI Advice Group is threatening the viability of projects and
an uncertain economic outlook (high Pty Ltd [2022] FCA 496 was the first cyber increasing the risk of disputes and potential
inflation, increasing borrowing prices, falls security focused Australian judgment, for public liability claims.
in house prices and labour shortages), which has become a catalyst for companies
global supply chain issues, heightened and their boards to sit up and realise that The fallout of the cladding crisis continues
awareness of cyber risks and the social cyber security is not ‘an IT issue’ – it is a with regulatory changes that came into
contracts that prevail in the areas of wage risk that needs to be managed and is a effect to improve building standards,
theft, privacy and climate change. director duty. including 2022 National Construction
Code. In NSW, improved standards for
However, as with past economic cycles, The legacy of the Financial Services Royal training and accreditation introduced by
underlying economic fundamentals are Commission continues, with industry-wide the Building and Development Certifiers
strong and export revenue in mining self-reporting and remediations schemes, Act and Regulations have come into
is close to record levels such that and increasing regulatory pressure to effect. In Victoria, compliance authorities
Government expenditure is not under the audit advice provided against the existing such as the VBA have shown an increased
same pressure as in other nations. and new ASIC regulatory guides RG256 willingness to bring disciplinary action
and RG277. against practitioners for failure to comply
It has been a volatile 12 months for the
with relevant standards of conduct.
Australian class action market. Litigation The major consumer class actions against
funders have seen increasing levels of the ‘Big Four’ banks and other institutions Compounding the issues in the
regulation and new competition from are maturing, with many now settled, construction industry is the state and
plaintiff firms running new class actions including the so-called ‘junk insurance’ federal government spending on large
on a speculative basis for contingency class actions against ANZ, Westpac and scale infrastructure projects (including
fees in the Supreme Court of Victoria. CBA. Others will come to trial or be road, rail and Brisbane Olympic projects) is
The change of Federal Government mediated in 2023. causing further disruption to the availability
back in May 2022 has seen a range of of contractors and project staff.
foreshadowed amendments to unwind Consistent with the hardening market for
or water-down previous legislation and Financial Advisor PI, the coverage space Australia’s eastern seaboard saw
regulations affecting litigation funders and has seen a number of carriers litigating unprecedented catastrophic flooding in
class actions. the scope of exclusions. Most recently the 2022, with the NSW floods predicted to
Queensland Court of Appeal applied an be Australia’s most expensive ever natural
In contrast to the stance taken by the UK exclusion which referenced investments disaster. Many regions flooded three
courts, the Australian High Court upheld not included in the insured licensee’s or more times within the year, raising
the 2021 decisions in COVID related approved product list, where an authorised questions about whether some regions will
business interruptions claims, with a ruling representative had recommended a non- be uninsurable.
in favour of insurers. complying product. The Court upheld that
the financial advice to be covered by the Insurance industry groups have been
Cyber risk and security has remained engaging with state and federal
a top risk for corporate, governmentANNUAL INSURANCE REVIEW 11
governments to consider short and The significant data breaches in 2022 contributing to further insolvencies across
long term issues raised by catastrophic have put the sufficiency of Australia’s the board.
weather events, including issues around privacy laws under the microscope, with
insurability and the rising cost of insurance. a push for Australia to move to the ‘gold The effect of recent legislative changes
The scale of recent natural disasters, standard’ GDPR. aimed at enhancing consumer protection
coupled with existing commercial will increasingly be felt. In NSW, courts
pressures on the building industry is The deteriorating economic climate have begun deciding practitioner liability
impacting the timeliness and cost of any caused by inflationary pressure will also cases under the Design and Building
remediation work. test the boundaries of when courts will Practitioners Act. In Victoria, the state
permit the direct joinder of insurers. In combustible cladding rectification
Dust disease has been an ongoing concern Count Financial v Pillay, London based authority has taken first steps to join
for insurers in the Australian market. There insurers successfully resisted joinder to proceedings against builders and building
is continued upward pressure on damages proceedings under the Third Party Rights professionals to recover cladding
awards in asbestos cases and reluctance Against Insurers Act in New South Wales, remediation costs.
from appeal courts to interfere with trial a case which gives encouragement to the
decisions in this space. industry that the Australian courts will While the industry is being optimistic
determine the application of exclusions about tapering off of price increases, the
A growing concern is disease linked to when exercising their discretion whether construction market remains challenging.
work related exposure to crystalline silica to permit joinder. Conversely, courts There is likely to be considerable
dust, particularly in Queensland. are increasingly open to allowing underinsurance given the higher
joinder of insurers rather than deprive construction costs and inflation.
Various faith-based, social and government
institutions across Australia continue to claimants of their ability to bring claims to A challenge for liability insurers will come
face claims relating to historical instances final determination. from the ongoing emergence of the
of child abuse. A high profile area, 2022 2023 is expected to sharply demonstrate gig economy, where there is likely to be
saw the largest general damages award in the difficult balancing act that Australian continuing litigation involving the issue
Australia, setting a new high watermark for directors and officers now find themselves of whether gig workers are employees or
future claims and in NSW, the Civil Liability in, with a significant increase in large independent contractors. If a gig worker
Act 2002 (NSW) was amended to enable a insolvencies, shareholder and oppression is deemed an employee and causes loss,
court to set aside previous settlements of disputes, privacy claims and class actions. their employer may be found vicariously
child abuse claims. liable for their conduct.
A wild card for 2023 is the potential for
In the transport sector, 2022 saw major class actions not only with the Privacy Generally, climate change related weather
issues arising from port congestion around Commissioners but also for breach of events are expected to continue, causing
the world and Australia was not immune contract and securities class actions. claims pressure for the insurance sector.
to the impacts of labour shortages, high A huge number of catastrophic flood
demand for imported goods and COVID- The FI market and major financial claims will continue to be lodged with
affected vessel crews. This led to an institutions, including a number of the ‘Big insurers and, by sheer weight of numbers,
increase in spoilage claims for perishable Four’ Banks are yet to reach consensus greater numbers of disputes with the
goods, increased repositioning costs on policy response to the post-Financial Australian Financial Complaints Authority
and an ACCC investigation into potential Services Royal Commission consumer class and legal proceedings are expected.
collusion among lines over surcharges. actions. We anticipate that the claims on
the policies will be determined in 2023 There is likely to be sustained pressure
Marine insurers have also been feeling where multiple class actions have now on damages awards in dust disease
the effects of cyclone, storm and flood settled or will settle early in 2023. claims, with plaintiffs pointing to recent
damage, with loss of vessels, damage decisions as guideposts in settlement
to ports and cargo, and freight train There is also a likelihood for increased negotiations, and there will be a question
derailments following rail washouts. employment claims and potential class as to the impact of Victorian reforms on
actions arising with non-compliance contingency fees and legal costs.
Looking forward to 2023 with industrial instruments. There has
already been an initial wave of large scale In the institutional liability space, the new
Cyber risk is expected to continue to be ‘deed set aside’ legislation will be tested in
claims arising from underpayments and
a top priority in 2023. With two attempts early 2023. While the legislation refers to
break entitlements, and this is expected
to introduce legislation around ransom factors a court may consider, it is ultimately
to continue.
payments, neither surviving the change likely to be whatever a court considers
of government, the appointment of a There is expected to be no change to ‘just and reasonable’. This will be watched
Minister for Cyber Security will keep this the pressures faced by the construction very closely to determine the scope of past
issue on the legislative agenda for 2023. industry, with wage and material cost settlements that could potentially
inflation and ongoing high fuel prices be re-opened.ANNUAL INSURANCE REVIEW 13
AUSTRALIA (continued)
With the National Redress Scheme (which and judgments, and call into disrepute
has a AU$150,000 cap) entering into defendant institutions. We see this trend
its fifth year and an increase in highly continuing, inflating plaintiff expectations
publicised large civil settlements, a and maximising pressure on defendant
reduction in the number of redress claims institutions and their stakeholders.
is anticipated and an increase in those
that choose to pursue their claims via civil Finally, transport and marine insurers will
litigation. be watching out in 2023 for a report from
the Strategic Feet Taskforce to further
Plaintiff firms are increasingly using the strengthen Australia’s maritime supply
media to publicise large settlements chain channels.
CONTACT
Jonathan Newby
Partner
+61 2 8281 4406
jonathan.newby@cbp.com.au14 2023
CANADA
MILLER THOMSON
Mark R. Frederick | Partner
Vanessa De Sousa | Associate
Key developments from 2022 in the underlying litigation. The plaintiff (the Policy) issued to the insured obligated
in the underlying action alleged that two Lloyd’s to defend the action. There was no
2022 brought with it the economic, social,
underground fuel storage tanks (USTs) dispute that the claim fell within the grant
and political reverberations of the COVID-19
were not disclosed at the time of the sale. of coverage, rather that certain exclusions
pandemic, impacting insurance companies
The underlying claim specifically alleged applied concerning own works. The Court
and the regulation of insurance more
that the USTs had leaked. The insurers analysed the effect of the exclusions to find
broadly. In this chapter we recap some of
denied coverage based on a pollution that they could be properly applied in a case
the major changes impacting the insurance
liability exclusion in the policies. The Ontario of this nature.
industry moving into the new year.
Superior Court of Justice concluded that the
pollution exclusion applied and the insurers Following the three-step analysis mandated
Business loss coverage had no obligation to defend or indemnify by the Supreme Court’s decision in
We continued to see the pursuit of business the insureds in the underlying action. The Progressive Homes Ltd v Lombard General
interruption claims and pandemic-related Court gave effect to the clear language of Insurance Co. of Canada, 2010 SCC 33
insurance in 2022. 202135 Ontario Inc et al the policy reading the contract as a whole. (CanLII), [2010] 2 SCR 245 (Progressive
v Northbridge General Insurance was the Homes), in deciding whether the duty
first business loss coverage case related to defend has been triggered, the court
Social inflation and inflation
to COVID-19 to come before the Ontario must determine:
Court of Appeal. The insured owned seven more broadly
daycare locations which were insured The cost of living continues to rise with • whether the claims as alleged against the
for property and business losses. Due to Canada’s official inflation rate seeing year insured possibly fall within the duty to
the pandemic, all seven daycare centres over year increases throughout 2022. With indemnify;
were closed for three months between supply chain issues continuing to hamper • whether the claims are excluded from
March and June 2020, resulting in business the economy, we see increased exposure on coverage; and
losses. The insured was holding a business insureds in the construction industry. • whether the claims fall within
insurance policy with their insurer that an exception to an applicable
Social inflation refers to all the ways in which exclusion clause.
included a special endorsement to cover insurers’ claims costs rise over and above
business losses arising from a pandemic general economic inflation, including shifts
with liability for business interruption limited The court analysed the Operations
in societal preferences and trends. Social
to $50,000. The insurer took the position Exclusion and the Project Damage
inflation has a direct effect on claims-related
that its liability was limited to $50,000 as a Exclusion to find both applied to exclude
losses and insurance costs.
global total for all of the seven locations. coverage. The issue was whether the railway
The insured brought an application seeking In a series of lectures done for the Lloyd’s company’s claim against the contractor
a declaration that the $50,000 limitation Marketplace, Miller Thomson raises the alleged property damage to the “principal’s
applied per daycare location so as to question of how social inflation is affected existing surrounding property, not forming
entitle them to a global total of $350,000. by economic inflation and how economic part of the project works.” The insured
The Court found in favour of the insured, inflation often is yet another trigger for contractor argued that the foundational
that the limit of liability clause, read in the the societal and judicial factors that affect soils beneath the embankment were
context of the policy as a whole, clearly social inflation. surrounding property, not forming part of
and unambiguously meant that the limit of the project works.
liability was $50,000.00 per location. Contractor Course of Construction The court applied the Supreme Court’s
Miller Thomson were successful coverage analysis of the exclusion clauses in play in
Duty to defend and the counsel in a large claim involving Progressive Homes, one of which excluded
pollution exclusion construction of a railway embankment “property damage to that particular part
In Kin v Ecclesiastical, the insureds brought in Western Canada (see Kelly Pantaluk of your work arising out of it or any part
applications against their insurers seeking Constuction Ltd v Lloyd’s Underwriters, of it.” The phrase “that particular part of
a duty to defend in an underlying action. 2022 SSKB 227). The issue was whether the your work” meant that the insured’s work
The insured sold a property to the plaintiff “Course of Construction Wrap-Up Policy”ANNUAL INSURANCE REVIEW 15
could be divided into component parts. Continuing the three-step analysis, his OSFI recently issued an advisory that
This narrowed the scope of the exclusion Lordship then turned to the contractor’s applies to all Canadian mortgage insurance
clause so that coverage might remain for reliance on Endorsement 22 to determine companies. It implements administrative
non-defective components of the insured’s whether it creates an exception to the interpretations to the Mortgage Insurer
work. The insured presented argument that Operations Exclusion. This turns on whether Capital Adequacy Test (MICAT) with respect
a restrictive interpretation of “that particular the railway Claim alleged damage to the to the determination of requirements for
part” should apply so as to look only at the railway’s “existing surrounding property, variable mortgages and adjustable-rate
last lift of soil on the embankment so as to not forming part of the project works.” The mortgages. The amortisation of these loans
allow for coverage below the last lift and Contractor argued that the “foundational could temporarily extend until the payment
restrict the exclusion to the most recent soils” were not part of the project works, amount is set to align with the original
lift of soil. while Lloyd’s responded that “the amortisation period. OSFI will continue to
foundation soils were an integral part of assess whether mortgage underwriting
The question became whether the railway the embankment, with which his Lordship standards are well-adapted and sufficient.
Claim contemplated that the contractor’s agreed. First, the foundation soils are an
work on the embankment could be integral part of the embankment. Second, What to look out for in 2023
subdivided into component parts and monitoring the stability of the foundation
whether the claim alleges that only the final We expect to see the continued economic
soils was part of the contractor’s scope of
layer of soil was defective as opposed to and social fallout of the COVID-19 pandemic
work, as alleged in the railway’s Claim.
there being “ongoing warning signs” of a to impact the claims environment and
predictable embankment failure. Justice Layh was alive to a possible objection insurance industry at large. Coupled with
that he was reading Endorsement 22 to this we will see continued inflationary
Mr Justice Layh distinguished this case from narrowly. He noted that the endorsement pressures on the real estate and other fields
the facts of Progressive Homes: he found could apply if, for example, the collapse had that rely upon real estate with potential
that successive and repetitive works of an damaged nearby equipment which was not downward effect on values, which will
identical nature cannot be separated into used for construction on the project. influence many other markets.
component parts.
Summing up, Justice Layh addressed briefly With respect to business loss coverage,
His Lordship also addressed the contractor’s the distinction we had raised between wrap- we will continue to see more claims and
argument that it was not performing up policies and builders all risk policies. applications addressed by Canadian
operations “at the time of the damage” He noted that the substance of the policy, appellate courts. We expect that there will
(as the damage had occurred at night not its label, is determinative and he had be further litigation in the business loss
when work had shut down). He agreed not relied on the distinction to reach his space in the context of class actions that are
with Lloyd’s position that construing the decision, which was that Lloyd’s did not starting to crystalise.
exclusion clause so narrowly that it only have a duty to defend KPCL and awarded
applies when the insured is touching We foresee that the economic uncertainty
Lloyd’s costs.
the property would read it out of the going into the new year will continue to
policy. The fact that the contractor was Note: The above case is now on appeal to shape regulatory responses to increased
not actively performing works when the the Saskatchewan Court of Appeal. risks related to private sector indebtedness
embankment failed does not make the and mortgage underwriting.
exclusion inapplicable. The risk environment,
Next, his Lordship considered KPCL’s increasing interests rates and
argument that, since the railway claim regulatory responses
against the contractor alleged wrongdoing The Canadian Office of the Superintendent
by various consultants, the contractor was for Financial Institutions (OSFI) published its
entitled to a defence for damages arising Annual Risk Outlook for Fiscal Year 2022-23.
from their failures. However, the court In the latter half of 2022, OSFI observed a
noted that the railway pleading noted the material shift in its risk environment. Higher
insured was the general contractor for inflation and monetary policy tightening CONTACTS
the project, responsible “for all aspects has triggered a material rise in interest rates.
Rising costs of debt, given a relatively robust Mark Frederick
of construction, project management,
level of private sector indebtedness altered Partner
safety, traffic management, testing and
OSFI’s analysis of its risk environment for +1 416 595 8175
commissioning …” The judge observed
2022-23. OSFI noted that further rate hikes mfrederick@millerthomson.com
that clause 8(c)(i) excludes from coverage
“operations... performed by or on behalf and a house price correction could lead to Tom Whitby
of the Insured”. The words “on behalf of” increased borrower defaults, credit losses Partner
also distinguish the present case from and a broader housing-led softening of +1 416 595 8561
Progressive Homes. the economy. twhitby@millerthomson.com16 2023
FRANCE
HMN PARTNERS
Romain Schulz | Lawyer of counsel
Key developments in 2022 four identical decisions finding that the A large number of matters have been
exclusion regarding pandemic is valid. In settled out of court, but litigation remains,
COVID-19 Pandemic each of these four matters the decision and is going nowhere in the near future.
We mentioned in last year’s review the rendered by the court of appeal of Aix-en-
issue of coverage of operating losses when Provence is quashed and the case is to be Remote sale of insurance contracts
there is no physical damage, in the context ruled again by the same court (composed ACPR (Autorité de Contrôle Prudentiel et
of the COVID-19 pandemic. by other magistrates). de Résolution: French authority supervising
insurance) pursues its surveillance of
The question of coverage of operating As to the impact of this case law, we
remote sale of insurance contracts,
losses sustained by professionals following may remind that ACPR (French authority
especially through telephone.
the lockdown received various answers and supervising insurance) conducted an audit
the decisions rendered by various courts of damage insurance contracts available The Sanction Commission of ACPR
(of first instance and on appeal) in France in France and as at June 2020, the result rendered on 17 October 2022 a decision
left an impression of chaos. was that 93% of the contracts expressly sentencing an insurance broker. This
excluded an event as exceptional as the decision calls few remarks.
Litigation is now maturing. A general trend pandemic. The wording may of course
is that courts of appeal are less favourable differ from a contract to another, but Cour The first remark is that the broker
to the insured than courts of first instance. de cassation provided clear guidelines. had previously been sentenced on
They are more prone to admit validity 28 February 2020, under a different name
and then application of the exclusion We may however expect that some insured but for the same breach of duty. Still, ACPR
aiming pandemic. do not admit the position expressed by shows strict vigilance, and it is obvious
Cour de cassation and that some lower that this responds to a policy of protection
Cour de cassation (French Supreme courts resist. of consumers.
Court) rendered on 1 December 2022ANNUAL INSURANCE REVIEW 17
The second remark is that the broker Parametric insurance more complex that some properties and
operated through a call centre established Parametric insurance is not exactly a new some types of damage are not subject
out of the European Union. This is not trend: it has existed for several years but to the compulsory coverage of natural
illegal in itself but requires that the broker remains limited in France. Its development disasters and to this extent, the parametric
operates a control through its employees is still to come. As there is no specific insurance remains relevant.
based there. regulation, such contracts should be
The most serious issue regarding
subject to insurance law when they are
parametric insurance is the principle
What to look out for in 2023 deemed insurance, or alternatively to
according to which the indemnity paid
common contract law.
Insurance and new technology under insurance cannot exceed the
NFTs (non-fungible tokens) have rapidly This poses questions insofar as even when damage actually sustained by the insured
met insurance. As any valuable artwork, parametric insurance is presented as a (article L. 121-1 of French Insurance Code).
they can be subject to insurance. simplified insurance, it remains insurance There is then a risk that the lump sum
Regarding property insurance, an and simplification cannot lead to the rules granted through parametric insurance
interesting question is to determine of insurance law being overlooked. exceeds the actual damage. In order to
whether the damage guaranteed is prevent this, it is often stipulated that
Parametric insurance most often covers the amount of indemnity is the lower of
material or immaterial. NFTs can also
meteorological hazard. It is then likely the following: either the lump sum or the
involve other types of insurance. High
that there is multiple insurance policies damage actually sustained. This implies
volatility of prices can lead to suspect price
active when parametric insurance covers that a loss is declared and instructed in a
manipulation and then claims involving
natural disasters, which are subject to classic and well-known fashion, but the
fraud insurance or PI insurance.
a compulsory coverage in property wished simplification is then limited.
insurance contracts. The issue is all the
CONTACTS
Simon Ndiaye Gérard Honig
Partner Partner
+33 1 53 57 50 41 +33 1 53 57 50 37
sndiaye@hmn-partners.com ghonig@hmn-partners.com18 2023
NETHERLANDS
KENNEDY VAN DER LAAN
Marieke Opdam | Professional Support Lawyer
Key developments in 2022 As another concrete example of a class 30 years after the exposure to asbestos.
action, shareholders organisation ‘VEB’ Often, this period has already expired
Class actions has held Philips liable for the damage when the (former) employee becomes ill.
In the Netherlands we have seen a flurry caused to shareholders. In the past, certain Recently, the Dutch Association of Insurers,
of new cases under the new Dutch regime apnea devices from Philips contained a a large employer’s organisation and various
for class actions (60+ since inception in defect which could cause severe health trade unions have made new agreements
2020), including class actions against tech damage for the user. The problems with about the statute of limitations for an
platforms that are related to breaches the ventilators were first reported in 2021. asbestos claim. This agreement is laid
of EU privacy laws and competition law After Philips has reported problems with down in the Covenant Institute Asbestos
(eg Apple, google, TikTok). The new the ventilators, the market value had Victims. As a result, for an asbestos claim
regime has also led to the establishment of decreased considerable. According to the from an employee, it is no longer relevant
plaintiff-side, boutique law firms that are VEB more than €16bn in direct damage can when the victim was exposed. In practice, a
related to foreign litigation funders. The be traced back to inadequate provision lot of insures already ceased to invoke the
first decisions were published regarding of information about the apnea affair. absolute limitation period.
admissibility of claim vehicles (ie actual The VEB has informed Philips that the
class needed) and the applicability of the VEB is prepared to go to court to obtain 2022 showed a relevant Supreme
new regime (regarding the cut-off date of compensation for the shareholders. Court rulings regarding
November 2016).
salvage costs
Statute of limitations for The roofs of an agricultural business
Furthermore, the first major investor’s
claim against Netherlands-based asbestos claims contain asbestos. When material
Airbus and its D&O’s was initiated. The As of 21 October 2022 insurers will no containing asbestos was found in the
plaintiffs state investors suffered losses longer invoke the absolute limitation drainage zones of the roof, the insured
after buying shares in Airbus that were period in the event of a claim from claimed compensation under his
overpriced because the company an asbestos victim against a (former) ‘environmental damage insurance’ for
withheld information about corruption at employer. In principle, an asbestos claim the costs of remediation of the soil and
the company. from a(n) (former) employee expires the costs of replacing the roof plates. OnANNUAL INSURANCE REVIEW 19
22 April 2022 the Supreme Court ruled the Dutch government could enable an obligation to achieve results. Regarding
that a measure that is required to avert a solidarity (compulsory) nature of an the business relations of the Shell group,
an imminent danger must be regarded insurance solution and ideally even including the end users, this is a serious
as a ‘special’ measure even if would form participate in a reinsurance pool. Time will best-efforts obligation.
part of normal maintenance in other tell if this is a realistic proposal and if the
circumstances. Compensation is in order government is willing to participate and to Shell has appealed against the decision.
if removal of the roof plates must be what extent. Shell states that there are aspects of the
regarded as salvage. court’s judgment that are not feasible and/
Furthermore, in terms of climate change, it or reasonable, to expect Shell to achieve.
is worth mentioning that Shell is appealing Furthermore, Shell argues that customers
What to look out for in 2023
the 2021-ruling of the Court of The Hague would buy fossil fuels from other
Climate change that Shell is obliged to reduce the CO2 companies if – for example – Shell decided
In last year’s update we included a report emission of the group’s activities by 45% to stop selling petrol.
from the Authority for the Financial net at the end of 2030, compared to 2019.
The procedure was initiated by parties Pending the outcome of the appeal, Shell
Markets (AFM) on climate change related states it is taking steps to comply with the
losses that are getting more and more including ‘Milieudefensie’ and Greenpeace
Netherlands. With this ruling, the Court ruling of the Court. The first hearings in
uninsurable in the Netherlands, and the the appeal case are expected to take place
need for insured parties to be aware of gave substance to the unwritten standard
of care in Dutch law on the basis of the in 2023/2024.
that. Flood damage is one of these risks. In
the Netherlands, individual insurers have relevant facts and circumstances, the
best available science on (the tackling Class actions in 2023
so far failed to offer comprehensive flood
of) dangerous climate change, and the In 2023 more clarity is expected as to
insurance on a large scale.
broadly supported international consensus competing claim vehicles and open
The Dutch insurers have now proposed that human rights offer protection against questions regarding the admissibility
to introduce a mixed public and private the consequences of dangerous climate bar for class actions. We also expect
system that enables citizens and (small) change and that businesses must respect more cases, in particular related to tech
businesses to protect their assets against human rights. Regarding the activities of companies. Lastly, the new EU class-action
all types of flood damage. In this system the Shell group, this obligation to reduce is regime for consumer cases enters into
force on 25 June 2023.
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.comANNUAL INSURANCE REVIEW 21
LATIN AMERICA
RPC
Alex Almaguer | Partner, Head of Latin America Practice
Chris Burt | Senior Associate
Martin Jimenez | Mexican Qualified Lawyer
Key developments in 2022 losses, mainly under property policies. Inflation will be a “hot topic” in 2023.
For instance, the extreme droughts in Inflation will have a direct impact on claims
2022 has been marked by a slow recovery
Argentina, Brazil, Paraguay, and Uruguay during 2023 across all lines of insurance
in the global economy after the COVID-19
have increased claims in the agriculture business. In particular, in sectors such as
pandemic. However, Russia’s invasion
and power generation sectors. Property, Construction and Energy, due
of Ukraine in late February 2022 and
to the increase in the cost of material
the severe lockdowns in China have We have noticed an increase in awareness and labour.
limited regional recovery and injected amongst (re)insurers regarding the
great uncertainty. implementation of corporate policies to Also, these sectors will be impacted by
reach the Net Zero goal by 2050, especially delays in getting spare parts, as the supply
COVID-19 has continued to affect the
in the energy sector where there have chain will have “bottlenecks” caused by
insurance market in Latin America during
been many discussions on how to drive the the closure of ports during the pandemic,
2022, especially in those business sectors
transition to a low-carbon economy. which is resulting in port congestion.
which had to close due to government-
imposed lockdowns. There are still many These climate change-related In addition, the conflict in Ukraine is
unresolved COVID-19 insurance claims in developments have impacted how (re) having a considerable impact on the
the region and some of them have already insurers calculate their premiums in Latin energy sector.
escalated to litigation or arbitration. American countries. For instance, insureds
in Chile and Peru have faced significant Inflation will likely create the risk of under-
There remains a debate as to whether BI insurance. Low valuations of insured assets
increases in the cost of coverage for
losses should be payable in circumstances will mean that the limits purchased will
natural disaster exposures during 2022.
where physical damage could be be not sufficient to cover the costs of
We expect that insurance premiums will
considered to be no longer the direct reconstruction, repair, or replacement of
continue to increase.
cause of the interruption. the insured risks. Accurate declared values
will be crucial.
It is still unclear whether local courts What to look out for in 2023
and insurance authorities will rely on the Several global factors, such as the Finally, social conflict and political violence
English Supreme Court’s FCA Test Case continuing consequences of the have increased in Latin America in recent
decision when determining the pending pandemic; the increase in production years. Protests against austerity and
COVID-19 claims. costs, Russia’s invasion of Ukraine and the increasing inequality in Argentina, Brazil,
political, social, and economic instability in Chile, Colombia, Ecuador, Mexico and Peru
2022 has been marked by the increase in
some countries, have are having an impact have led to numerous, substantial losses.
extreme weather events in the region,
which can be seen as an effect of climate on the global economy.
We expect that political violence related
change, producing billions of dollars in losses will increase during 2023.
CONTACTS
Alex Almaguer Lucy Dyson
Latin America Insurance Partner
Practice Lead +44 20 3060 6308
+44 20 3060 6371 lucy.dyson@rpc.co.uk
alex.almaguer@rpc.co.uk22 2023
USA
HINSHAW & CULBERTSON
Scott M. Seaman | Pedro E. Hernandez | Co-Chairs Global Insurance Services Practice Group
Key developments in 2022 announced the formation of an Office property as required under most US policy
of Environmental Justice to target wordings, governmental orders do not
After a brief abatement due to pandemic-
corporate polluters causing harm in constitute loss of property, and/or virus
related litigation delays and court closures,
underprivileged communities. exclusions preclude coverage. Insurers
social inflation returned with a vengeance
have prevailed on the majority of summary
replete with numerous nuclear jury The US Supreme Court, in the West
judgment rulings as well.
verdicts. Although a case in any state is Virginia v EPA case, struck down a rule
capable of resulting in a nuclear verdict, promulgated by the US Environmental Insurers have prevailed in decisions before
Georgia, Pennsylvania (Philadelphia), Protection Agency (EPA) to address carbon the US Courts of Appeal for the First,
California, New York, Illinois (Cook, dioxide emissions from existing coal and Second, Fourth, Fifth, Sixth, Seventh,
Madison, and St. Clair counties), South natural gas-fired power plants, ruling the Eighth, Ninth, Tenth, and Eleventh Circuits
Carolina (for asbestos litigation), Louisiana, agency exceeded its authority under the (the Third Circuit has not rendered a ruling
Florida, Missouri (St. Louis), New Jersey, Clean Air Act. This may delay, but is not as of 1 December 2022). Insurers also have
and Texas have been characterised as likely to derail. the EPA’s efforts. prevailed in appeals before State Supreme
problematic jurisdictions. Courts in Iowa, Massachusetts, Ohio,
Although ESG momentum continues, there
South Carolina, Oklahoma, Washington
With economic inflation at a 40-year has been some backlash. For example,
and Wisconsin. Policyholders were
high in the US, insurers found themselves several states have proposed or passed
handed a victory in the Vermont Supreme
looking down the dangerous double legislation in the form of boycott bills
Court allowing a lawsuit to go forward.
barrel of social inflation coupled that prohibit states from doing business
Insurers have prevailed in the majority
with economic inflation, presenting with institutions that discriminate against
of state intermediate appellate court
underwriting and claim challenges. ESG companies in specified industries or
decisions to date. Many cases and appeals
remains an overriding issue for insurers bills prohibiting state from employing
remain pending, but few new business
and their policyholders and has given rise ESG considerations in their investment
interruption filings are expected as the
to greenflation. decisions. Two Los Angeles California trial
contractual limitations period has expired
court decisions struck down laws relating
Covid-19 business interruption, cyber under most first-party policies. None of
to composition of boards of directors on
and privacy, hurricanes, and forever the legislative proposals seeking to provide
equal protection grounds.
chemicals were major subjects for litigation coverage by fiat or creating a government-
and claims. COVID-19 business interruption backed fund have become law.
ESG/Sustainability and other pandemic Cyber
The Biden administration and many coverage litigation For twelve consecutive years, the US has
states continue to push ESG on an “all By 1 October 2022, 3,262 COVID-19 experienced the highest average costs of
of government” basis. The US Securities coverage cases have been filed throughout a data breach of any country at US$9.44m.
and Exchange Commission proposed an the US, with approximately 2,124 involving Remote work, which exploded during the
onerous climate-related disclosure rule and business interruption, 1,927 extra expense, Covid-19 pandemic, increased the average
its announcement of enforcement results 1,833 civil authority, 256 ingress/egress, costs by US$1m, where it was a factor in
for 2022 makes clear it is stepping up 125 contamination, 98 event cancellation, the data breach. Ransom attacks and
enforcement activity with respect to ESG. and 91 sue and labour. More than 475 cases state sponsored cyber-attacks remain key
The US Department of Labor announced a were filed as putative class actions and 834 concerns for insurers and policyholders
final rule, styled as Prudence and Loyalty in cases include allegations of bad faith. At and supply chain attacks have become a
Selecting Plan Investments and Exercising the trial court level, insurers have prevailed growing challenge.
Shareholder Rights, promulgated by the in almost 80% of rulings on motions to
dismiss in state courts and in more than A New Jersey trial court ruled that a
Employee Benefits Security Administration
95% of the rulings by federal courts, mostly hostile/warlike action exclusion in various
that allows retirement plan fiduciaries
on the grounds that the virus claims do not property policies did not prohibit coverage
to consider ESG factors in investment
involve “direct physical loss or damage” to for the NotPetya cyberattack launched by
choices. The US Department of Justice
the military arm of the Russian FederationANNUAL INSURANCE REVIEW 23
government against Ukraine because such courts in New York and Ohio even Opioids
an exclusion only intended to exclude though the same underlying judgement A 2022 bipartisan congressional report
“traditional” forms of war. Another was involved. found that the opioid epidemic costs
coverage action in Illinois was settled in the US approximately US$1tn annually.
advance of trial. US insurers continue to Forever chemicals Approximately, 3,000 state and local
assert historic war exclusions bar coverage, Forever chemicals have been around governmental entities have been seeking
but are including newer exclusions since at least the 1940s and have been to recover costs of public services
in policies. used in so many products they are said associated with opioids from drug
by many to be ubiquitous. Yet, forever manufacturers and distributors. The
The vast majority of cyber coverage
chemicals only recently became one of US$26bn settlement a coalition of state
decisions to date involve silent cyber
the most fervent areas for civil litigation. attorneys general reached with Johnson
claims (ie claims under traditional first-
There are now thousands of cases pending and Johnson and three distributors in 2021
party, third-party and crime/fraud
across the US, with some eye-opening grabbed the headlines.
policies). However, decisions under cyber
settlements such as a 3M settlement of
policies are now being rendered with no A California federal judge ruled that
$850m, $70m by Wolverine, and DuPont’s
clear trend of decisions. Walgreens, a drug store chain, substantially
settlement with its spin-off Chemours
culminating in the creation of a $4bn contributed to the public nuisance in
Privacy San Francisco associated with opioids. The
fund for future liabilities. Over a dozen
The US still lacks an encompassing federal court stated that a subsequent trial will
states are suing manufacturers and others
law comparable to the GDPR, but several be held to determine the extent to which
for contaminating drinking water and
states enacted their own data privacy and Walgreens must abate the public nuisance
damaging natural resources.
security laws. Data breach notification that it helped to create. The tort of public
laws are in place in all 50 states (which Governmental regulators in the US nuisance is a growing concern in some
have varying rules and definitions as to arrived late to the scene. It was not states, including California.
the definition of breach, the extent of until September 2022, that the Biden
any exemptions, and the timelines for administration announced it would Opioids coverage litigation has produced
providing notice to affected individuals). designate some forever chemicals as mixed results, but many courts have
There are now at least five different hazardous substances under the nation’s recognised that liability insurance policies
comprehensive state privacy laws and 25 Superfund cleanup program. The 2020 do not provide coverage. The Delaware
different state data security laws in the National Defense Authorisation Act Supreme court led off 2022 by ruling that
US. California leads the way with the most requires the US Environment Protection distributor Rite Aid was not entitled to a
comprehensive data privacy and security Agency to get an inventory on PFASs made defense because recovery was sought for
laws, which goes into full effect in January in and imported into the US since January economic damages, not personal injury.
of 2023. Illinois’ biometric privacy act 2011. Recently, it was reported that a rule Similarly, the Ohio Supreme Court ruled
continues to generate cases, liabilities, proposed by the EPA would require small that Masters Pharmaceutical was not
and requests for insurance coverage. The businesses to pay over $863m to report the entitled to coverage because the local
California Supreme Court recently ruled production and importation data required governmental entities are attempting
that the right to privacy includes the right as opposed the less than $2m previously to recover economic losses as opposed
to seclusion in a fax blasting case involving projected by the EPA. Now, several states to damages because of bodily injury. A
Yahoo, an issue upon which US courts have been regulating and/or banning California federal court ruled insurers had
are divided. these chemicals. no duty to defend a drug distributor as
the policyholder’s over-distribution of
Some forever chemical coverage actions opioids led to the foreseeable diversion of
Lead paint
have been filed with many more to come. prescription painkillers did not arise out of
Coverage issues relating to the US$400m
Numerous issues will be presented. an accident or occurrence. This decision
plus lead paint abatement fund involving
The early results have been mixed with is on appeal.
three lead paint manufacturers have
respect to the application of pollution and
been subject to three separate coverage
actions. Insurers prevailed at the trial
hazardous waste exclusions. Construction defect and weather-
court and on appeal in California in the In a case involving EtO emissions from related claims
ConAgra case based upon the insured’s a Medline facility, an Illinois appellate Florida and the gulf coast remain reliable
predecessor having actual knowledge court ruled there was no coverage under bastions for construction defect and
of the harms associated with lead paint a pollution liability policy because the weather-related claims. Florida property
when it promoted lead paint for interior discharges had been occurring since 1994, insurers have been impacted heavily
residential use. In the Sherwin-Williams long before the policy’s September 2018 and, in some cases, have been rendered
and NL Industries cases, the policyholders retroactive date. insolvent. Florida enacted two statutes that
prevailed in the intermediate appellate interposing litigation reform impacting
first-party claims, particularly with respectYou can also read
