Frédérique De Simone
31 January 2019 11:30
Photo : Burst
The rise of social movements, such as #MeToo (against sexual harassment), has its impacts on the insurance market of the directors and officers (D&O).
The firm’s rating A.M. Best reveals that this phenomenon, as well as the popularity that it generates on the social networks, could complicate the lives of the insurers present in the market in D&O. Worst : loss systemic could even arise.
In his report the Emerging risks and greater complexity challenge D&O insurers, the analysts at A. M. Best shall provide that the profitability of this segment of the market will be under pressure in the short term. It is because of the new challenges with which insurers in this market need to now combine that increase in complexity.
The analysts of the firm rating identifies several factors that increase the number of claims. Moreover, the number of disputes leading to class action lawsuits is also increasing. By 2017, this number has increased by 52% compared to 2016.
A new era
The proliferation of lawsuits and class actions creates a new schema in the world of insurance, say the analysts at A. M Best. The market of D&O becomes much more difficult to assess, and to subscribe, they add.
Thus, the numerous allegations of sexual misconduct, harassment, and abuse of power, which are part of the movement #MeToo and who have been brought to court, have led to the loss among the insurers. The work practices and directors and officers liability are among the factors that lead to higher costs for the insurers of the market in D&O.
Social networks : call for vigilance
This surveillance ensures that the insurers present in the market for D&O insurance should be more attentive to what is published on social networks, say analysts at A. M. Best. Thus, insurers take into account the impact and possible consequences on the general coverage of enterprises that adopt innovations, such as the chain of blocks (blockchain), and artificial intelligence. According to the analysts at A. M. Best, these innovations would help to counter the misconduct covered by the D&o insurance.
The new eu regulation concerning protection of private information, the general Regulation on data protection (GDPR), is another factor that insurers must consider. The analysts at A. M. Best believe that the entry into force of the new framework could have a significant influence on the profitability of insurers. In the case of non-compliance with the GDPR, significant penalties, including heavy fines, are imposed on the offenders.
The GDPR could also lead to a more thorough review of the terms, conditions and policies of the D&O insurance, in particular to better explain the terms of the coverage exclusion.
The market share of the market for D&O in the United States
Several players may withdraw
The reinsurance brokers Guy Carpenter, predicted that several players will retire soon of the insurance market in D&O. FlashFinance.ca, a newsletter with wall charges belonging to the Journal of the insurance, explain the reasons in its edition of next Monday.
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