Insurance sector still scratching head over ‘muddy’ emerging risk of intellectual property, cyber and general liability cross-section – Lockton

Risk managers could be facing “new exclusions” on their global insurance programmes as the “insurance community is still trying to figure out” coverage for the emerging protection gap “between intellectual property, cyber and general liability”, according to Katrina Schellens, senior vice-president and practice leader within the global solutions team at broker Lockton.

Speaking exclusively to Insurance Times, Schellens flagged this “cross-section” as an emerging risk for multinational organisations, explaining that the intersection of these three lines of insurance “gets muddy very quickly” where insurers are still scoping out how individual policies should respond.

She said: “There’s a cross-section between intellectual property, cyber and general liability – and the insurance community is still trying to figure out where [this risk] should be covered, to what extent it can be covered [and] how to underwrite for it.”

A key concern around this particular emerging risk, Schellens said, is the possible effect of artificial intelligence (AI) “to come into the picture and create litigation opportunities where intellectual property is compromised”.

As a result of this threat, Schellens noted that she had seen “some new exclusions around intellectual property from a general liability perspective that aren’t being picked up under cyber programmes”.

She added: “That’s extremely complicated. That cross-section gets muddy very quickly.”

Linked to this risk development, Schellens believes “there’s going to be an evolution around what global cyber policies can do [and] how clients want to use global versus localised cyber [policies]”.

She predicted “a huge uptake in purchase of cyber insurance” on the horizon.

Regulatory fragmentation

Schellens additionally pinpointed the global “fragmentation” of regulation as something Lockton’s global “clients are really struggling with”.

For her, this includes “navigating new data privacy laws that differ from country to country and region to region, [as well as] documentation, anti-money laundering and know your client requirements”.

This is a particularly pertinent challenge in countries extremely reliant on global supply chains, such as Mexico, Saudi Arabia, the United Arab Emirates, Brazil, China, Italy and Canada.

Schellens continued: “Regulations are changing everywhere and they’re all different. That is impacting mandatory insurance coverages that [multinational companies] have to purchase, how countries are dealing with funding for [natural catastrophe] losses, how they’re dealing with funding for cyber events. It’s just continuously fragmenting and making it harder for risk managers today.”

She recommended that organisations seek quarterly “updates on the regulatory changes across your operational footprint” that highlight “what has changed, what could be coming for a change, and how it’s actually being implemented in each of your jurisdictions”.

Pressing concerns

Although acknowledging the “evergreen challenges” faced by the risk community – such as “money movement, communication and really getting the basics right” – Schellens emphasised that “what’s most pressing today are geopolitical challenges”.

She said: “Are [organisations] doing everything they can to protect their assets and their people in the current climate, what’s around the corner? What should they anticipate, what’s available in the [risk transfer] market and what’s not?”

The other “hot topic” in Schellens’ mind is AI. Because so many organisations are now using this technology, Schellens feels “the table stakes have changed and there’s an expectation that everything is accurate and fast”.

In turn, this could lead to delivery misunderstandings when processes take longer than the AI driven norm.

“If any party in [a value chain] is not using AI to reach the new standard of what needs to be delivered to a client, expectations aren’t being met – and [this risk is] increasing quickly.

“I would definitely describe AI as a double-edged sword. It’s a creator of risk and it’s a solution for risk in so many different ways.”