22nd March 2023

Geneva Association new report looks at emerging Commercial Liability risk

A new Geneva Association report explores emerging trends in commercial liability risk, based on a survey of Geneva Association member insurance companies. The report identifies the most significant liability risks facing businesses and their insurers in the medium to long term as well as the approaches insurers intend to take in response.
In the VUCA (volatile, uncertain, complex and ambiguous) world, risks are constantly evolving and increasingly connected. The ways that risks can harm people and businesses are also changing.
Liability risks often have a long tail, meaning claims can take years and even decades to develop fully. This is attributable to delays in recognising an insurable event has occurred and the lags in settling claims if they are disputed and result in lengthy litigation. As a result, it is important for insurers to stay abreast of emerging liability trends.
To glean insight into the most significant commercial liability risks on the horizon for businesses and their insurers, The Geneva Association conducted a survey of liability experts at its member insurance companies. Based on the responses, this report identifies five key themes that are most likely to shape the corporate liability landscape in the coming years:
-A more plaintiff-friendly civil litigation environment. In common law jurisdictions, expanded interpretations of and attitudes towards the boundaries of corporate responsibilities, more aggressive plaintiff bar tactics and the development of third-party litigation funding models create an environment that is more conducive to plaintiff success.
-Ongoing digitisation. Greater interconnectivity increases corporations’ exposure to intangible risks, especially those linked to cybersecurity and data breaches. Nascent technologies such as the metaverse could also develop rapidly and have far-reaching liability implications.
=Increasing climate change litigation risk. Failure to prevent/mitigate climate change and ‘greenwashing’ constitute another area of significant potential liability risk. Inadequate disclosure of climate-related information by corporates likely poses the most immediate threat, which may be boosted by new ESG regulations being enacted in many countries.
-Growing evidence on the adverse effects of industrial contaminants. Litigation and regulatory scrutiny in this area is already increasing; industrial pollutants like per- and polyfluoroalkyl substances and microplastics may have a significant influence on commercial liabilities over the medium term.
-Heightened focus on corporate social responsibilities and governance. Lack of transparency and specificity around diversity, equity and inclusion standards and breaches of directors’ fiduciary duties to manage companies responsibly are bases for potential ESG-related liability. Data security/privacy regulations are also expected to have a significant influence on future corporate liability.
Responses to the Geneva Association survey suggest that re/insurers recognise the need to continually adapt their offerings to the evolving liability risk landscape. Refining policy language, adjusting policy limits and repricing will inevitably play a role, as will investing in improved exposure modelling, partnerships to gather relevant data/intelligence and share risks, and product innovation. These approaches will help ensure liability insurance maintains its socially essential function: ensuring victims are adequately compensated while also incentivising corporate insurance customers to reduce the risk of harm to themselves and others.

Report author:
Darren Pain, Director Cyber and Evolving Liability, The Geneva Association

neneva Association Trends(122 articles)