The law firm’s latest Annual Insurance Review also listed the top eight concerns for the sector in 2023
Cyber challenges, climate change and environmental, social and governance issues have topped the list of challenges the insurance sector will have to contend with in 2023, according to international law firm RPC.
In its Annual Insurance Review, published today (12 January 2023), the company also highlighted what it predicted would be the top eight concerns for the insurance sector in 2023.
The report, which examined the key developments in the insurance sector across 2022, presents a list of issues that RPC believed would be prominent in the coming year.
Simon Laird, global head of insurance at RPC, said: “Climate change, ESG, cyber and the continuing conflict in Ukraine remain centre stage for the insurance industry, creating both new opportunities for insurers and new challenges from a claims and coverage perspective.
“The headwinds that the economy is creating will also prove a significant challenge – recessions normally mean more claims against professional advisors.
“For insurers, the challenge is establishing which professions will be most exposed this time around.”
In its predictions for brokers specifically, RPC explained that inflation and the cost of living crisis could lead customers to shop around for more competitive deals, as well as reconsider their expenditure.
RPC added that brokers would need to be “particularly vigilant” about their own errors and omissions insurance - this includes ensuring that processes and conversations have been well documented where consumer decisions are concerned, especially if customers decide to choose a more affordable but less protective option.
Cyber war exclusions
RPC further explained that the scope of cyber cover would continue to be a hot topic in 2023 - particularly as Lloyd’s of London’s state-backed cyber attack exclusions are due to come into force in March.
The law firm added that it would remain to be seen whether 2023 saw these new exclusions tested.
Moving forward, RPC believes that the insurance market must balance insuring knowable risks with the needs of the commercial sector when it comes to managing the risk of cyber threats, while still keeping premiums both competitive and manageable.
The expansion of insurers’ commitment to sustainable insurance as they target net zero emissions and the rising frequency of climate-related natural disasters is also set to be a key theme for 2023, according to RPC.
The firm explained that, as the pressure increases to adopt renewable energy sources, insurers would need to adjust their underwriting portfolios to reflect the transition.
Alongside this, RPC projected that the changing climate would see more frequent extreme weather events impact the reinsurance sector, with catastrophe premiums expected to soar this year.
Alongside cyber and climate challenges, the firm said the insurance sector would need to keep an eye on:
- Directors and officers claims relating to ESG and the recession
- Crypto risks
- Construction claims
- Health and safety
- Claims against professional advisers in the property market