A new report from Global Insurance Law Connect (GILC) showcases that natural disasters linked to climate change, cyber security, artificial intelligence (AI) and regulations related to consumer protection are the “biggest challenges” facing insurers across 2024.
GILC’s annual Risk Radar report is a collection of insights from law firms across 27 different countries. Each firm provides details on the key changes to the insurance market in their region and provides an outlook for the coming year in that country.
Focusing on the U.S. insurance market, the report reveals that it finds itself at a critical juncture, “grappling with multifaceted challenges stemming from climate change, infrastructure vulnerabilities, and escalating cybersecurity threats.”
In particular, climate change is continuing to present a variety of challenges due to the increased frequency and severity of natural disasters.
“As a result, insurers are under pressure to adapt their risk management strategies, incorporate climate science into underwriting practices, and collaborate with policymakers to develop sustainable solutions that ensure affordability and availability of insurance coverage in a changing climate landscape,” the report reads.
As for the UK, GILC noted that it is an “intriguing period” in the UK insurance market. The firm explains that the industry is seeing traditional insurers competing with managing general agents (MGAs) from jurisdictions such as Bermuda, offering cover at competitive rates.
However, notifications of circumstances that may give rise to a claim are increasing, as is the severity and frequency of claims, the report explains.
Another key insurance market that is worth addressing is Brazil’s, which GILC states is experiencing a critical moment of transition, due to the growth of insurtech’s, the arrival of AI, and the consolidation of the long-term effects of the opening up of the reinsurance market in 2007.
Moving towards Australia, GILC notes that Australian insurers are continuing to strengthen their cyber security defences and build cyber resilience into operational and strategic decision-making.
Australian insurers are said to be investing in protecting their business and their customers and safeguarding confidential information.
GILC stated that insurers across Australia are leveraging AI to streamline market-facing operations, as well as to assist with pricing, claims management, underwriting, sales, distribution, and product design. As well as this, insurers are implementing chatbots and virtual assistants to help reduce time-intensive human input.
One more country that is worth highlighting is Germany, where cyber risks still remain a dominant topic within the country’s insurance market, particularly in the area of directors & officers (D&O) insurance.
As well as this, GILC stated that supply chain issues will continue to be a concern for insurers and policyholders in the German insurance market in 2024 and beyond due to terrorist attacks, particularly in the coastal regions of Yemen and Somalia.
Gillian Davidson, Chair of Global Insurance Law Connect and Partner at Sparke Helmore, commented: “We continue to see the emergence of major trends that are reshaping the insurance industry in every market and that have a significant global impact. The report shows that insurers in almost every market are grappling with climate-driven disruption, responding to a heightened sensitivity to cyber threats, and embracing the potential for innovation presented by artificial intelligence, all against a backdrop of increased geopolitical risks.”
Adding: “A new theme that has appeared in this year’s report is the focus on the regulatory and compliance challenges facing insurers relating to consumer protection. Customers want a fully customised and personalised experience, and regulators are pushing for a stronger focus on customers’ interests. They want more transparency, stricter regulations on insurance practices, and fair treatment of policyholders.”
