International Underwriting Association CEO Dave Matcham reviews the work the association has done in 2020 and believes there are challenges ahead for the market on a range of fronts in the coming year.
This time last year pandemic risk did not feature too highly in many discussions about insurance market priorities, but the experience of 2020 has, of course, changed everything. Clearly, total economic losses from a widespread pandemic event such as we have seen with Covid-19 cannot be adequately underwritten by the private sector alone.
A number of publicly backed schemes have been proposed to deal with future incidents and the IUA has been following developments carefully. It will be essential for companies to work constructively with the government during 2021 to develop a workable plan, including ensuring adequate coverage for vaccine development and distribution.
Since the outbreak of the crisis the IUA has been in regular contact with the UK Government, answering questions about its impact on insurers. Our Contingency Working Party, for example, has helped officials understand the nature of policy coverage and we have highlighted the constricted availability of new contracts in areas like trade credit.
Cyber risks will also remain a dominant topic of conversations in the London company market this year. As regulatory interventions have increased, all lines of business have been impacted by the issue and are responding with a variety of different actions. A number of new market clauses have been drafted by IUA committees, such as an extension clause to enable the provision of data protection cover in public liability policies. Differing approaches to cyber risks have been taken in different sectors.
General liability, for example has often been silent on cyber risks while for contingency cyber is generally covered as part of all risks policies. An important part of the IUA’s work is to keep companies informed of developments and a Non-affirmative cyber group runs alongside committees for general cyber underwriting, cyber reinsurance and cyber legal and claims issues.
Climate risks and their impact on property and assets have long been of concern for insurers, but again increased regulatory attention has helped push this topic further up the industry agenda. A supervisory statement issued by the Prudential Regulation Authority in 2019 required companies to develop a strategic plan for managing the financial risks of climate change. Subsequently, the IUA established a new Climate Risk market committee and this initiative quickly proved our most popular ever with more than 30 companies nominating representatives.
In 2021 the group will be working with the regulator as it develops its supervisory approach. In particular, June 20221 will see a Biennial Exploratory Scenario designed to stress test business plans against climate risks.
Finally, the availability of professional indemnity insurance is a major matter of concern for several different industries. In the legal profession, for example, the IUA has drawn attention to the problem writing an open letter explaining how cover could become unsustainable if underwriters are not allowed to cancel policies where the premium is not paid. Such issues must be addressed in 2021 to ensure adequate and affordable coverage continues.