Cyber threats from remote working and recession are now among the top concerns for London's professional indemnity (PI) insurance market following the outbreak of COVID-19, research by law firm Clyde & Co has uncovered.
After surveying 122 PI insurance professionals in the London market, the researchers found three key areas where the pandemic is expected to change buyers’ risk profiles over the next five years.
The heightened threat associated with weakened supervision of COVID-19 was the most prominent concern, cited by 68% of respondents, while 58% expect greater privacy, cyber and ransomware exposures.
Financing and insolvency consequences due to recession are the joint second concern, also mentioned by 58%, while the threat of regulatory intervention is also among the top fears for PI professionals.
Despite this trinity of challenges facing the industry, 94% of insurers are planning to write the same or more business over the next 12 months.
“These findings are both surprising and gratifying for the insurance market,” said Simon Konsta, partner at Clyde & Co. “That appetite is strong despite the challenges being faced should give the market a lot to think about as it confronts renewal season.”
The survey also found that 95% of insurers expect a greater number of claims in the next two years, with 67% expecting them to be more severe.
Furthermore, 94% are expecting to offer more restricted cover for specific perils in the coming year, and 46% to see a reduction of non-core PI covers.
Clyde & Co also surveyed buyers for their take on developments in the PI market, finding that 100% expect prices to rise, with 99% of insurers anticipating the same.
Additionally, 83% of insurers expect market change in the form of new entrants, exits and consolidation, while 39% expect more business to be written through managing general agents, binders and delegated authority over the next two years.
Konsta added: “Neither buyers nor carriers have any doubt that claims are set to rise, but there is broad agreement that London is well placed and has the appropriate capacity, competitive rates and robust claims functions to preserve its position as a pre-eminent international hub for PI risks.”
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Author: Chris Seekings