IIG News

IIG Insights: Evolving Exposures and the Changing Landscape of Casualty Losses

Darryl Grater, President of the IIG, welcomed everyone to our Insights Session and thanked our main sponsor Swiss Re Institue, who generously provided a specialised training session with an overview of casualty lines of business, various products addressing Covid and other casualty sectors. All IIG Insights Sessions are CPD accredited and can be accessed via our IIG CPD portal on our website.

Darryl reminded everyone that we have a few more sessions left before we close off for the year and encouraged all to continue attending.

Darryl introduced our two speakers for the day:

René Oefeli who is responsible for all Casualty Client Programs at the Swiss Re Institute. René joined Swiss Re in 1995 and was a leader of two worldwide networks within Swiss Re, Zurich regarding “Expert Circle for Emerging Risks”, Product Recall and Product Tampering Insurance.

Zaid Bhana is currently responsible for Treaty Casualty business in South Africa. He started his career with a retail insurance broker in South Africa in 1986. Zaid later joined Swiss Re in Africa in 2000 as a Casualty Facultative Underwriter and since 2009, Zaid has been based in Zurich, Switzerland.

Carli Jacobs, Head of P&C at Swiss Re South Africa introduced the topic and spoke briefly about our changing landscape and therefore taking on risk forms the centre of our industry. Risk evolves constantly, but the focus today is on landscape losses.  She advised that this is the final Swiss Re Insights Session for 2020 and each year their session hopes to reach many more representatives.

All questions will be accommodated via the Slido App.

Zaid kicked-off the session outlining their agenda which included a brief overview of casualty lines, risk of change, developing exposures and losses, Covid and casualty.

He highlighted the ever-changing risks and the fact that there are no silo’s anymore. We need more than a one-dimensional view and the industry must be ahead of the curve as change is exponential.

René added that there is a difference between Casualty & Liability and very often it’s spoken of as one category.

Casualty:

  • Motor (in its entirety),
  • Non-life accident (PA, Travel, WCA),
  • Liability

Liability:

  • Personal,
  • Property owners,
  • Products,
  • Commercial General Liability (CGL) / Broadform,
  • Professional Indemnity (EO) – Errors & Omissions,
  • D&O, Cyber, EIL

 

The risk of change can be pervasive through technological advances & scientific knowledge resulting in pervasive chemicals. Also, economic circumstances impacting the neighbourhood, social aspects, public awareness on pollution issues, legal standards-environmental liability legislation, class actions and punitive damages. All these elements increase the liability of a policyholder.

Zaid then touched on digital and technological developments which include, automotive, food, cyber/IoT/AI, nanotech, social & alternative media.

Technology, however, is not a dependency for everything, it cannot solve all problems and can sometimes trigger problems and more often than not, the human element is still preferred in interactions. We must determine what is realistic and achievable with tech at this point. Overarching on deliverables and societal issues have not been addressed fully. Cars these days can be completely AI driven as we go into the future vs the old Golf GTi which is fully driver based. How reliable is AI and full automation? These tests have been conducted in clean clinical environments and not in real-life complex and bustling cities. How do we then determine who is responsible for an accident?

 

Eventually we will find ourselves transitioning into electric namely non-combustible vehicles. The average panel beater will no longer be able to deal with sophistication and could become obsolete unless their own skills set is enhanced to accommodate the change.

Food these days is what we refer to as ultra-high processed and could have insufficient nutrition. Tech is required to extend shelf life, and this could have implications on the body and the environment, GMO sourced. This then extends to the use of Nanotech. What is a nano? It is one billionth of a metre or another example is splitting a hair by 80,000 = 1 nano. This is a level beyond our familiarity and this type of rapid tech developments that’s unknown equated to higher risk.

A short poll was taken to determine the top three largest food & beverage companies and the results were, Nestle, PepsiCo and Anheuser-Busch InBev. Surprisingly, Coca Cola does not even feature in the top five largest companies, despite its popularity in South Africa.

René then moved onto Product Liability with common examples being defective food products which can cause damage and bodily injury to a third party.

Food Intrinsic Hazards include:

Microbiological contamination (E Coli, spoilage), chemical and physical contamination (pesticides, residue, mercury contamination), intentional contamination, allergens, warnings (non-declaration)

And then there is also long-term damage like sugar addiction and obesity.

There is also a further complexity around the misuse of the alteration of products. Food safety can be traced along the chain from farm to fork which also includes restaurant that may practice poor hygiene procedures. There is an increase in the severity in contamination of food which also includes intentional contamination for varied reasons. We now have a growth in varying categories of food which includes, organic foods, convenience foods and nutraceuticals which are functional foods, a combination of nutrition & pharmaceuticals.

There is big increase in China for pork whereas in the US, the per capita consumption fell by 10% as fewer people are eating meat. The organic food industry has increased fourfold in the US. Convenience foods and nutraceuticals are not legally defined and therefore not regulated via the FDA in the US. These growth drivers are increasing chronic conditions in people but improving economic conditions. There is a vast grey area between food and drugs. If certain foods or ingredients are jurisdiction restricted, ordering online can be a loophole as there is no scrutiny on these deliveries. We also have now lab grown “meat” vs plant-based meat which triggers cultural & ethical debates.

Another poll was conducted to determine which company incurred the largest data breach and how many user accounts were compromised. The answer being “Yahoo” with approximately 3 billion accounts being compromised.

Evolving Exposures and Losses:

Directors & Officers:

  • Expansion of C-Suite,
  • bolder litigation,
  • Pervasive and greater regulatory scrutiny and collaboration,
  • Codes of governance,
  • Expansion of potential claimants,
  • Frequency of financial reporting and forecast reviews,
  • The whistle blower,
  • Social and environmental/climate

Professional medical liability

  • Insourced specialisation vs outsourced,
  • Tele/ E-Medicine > jurisdiction,
  • AI and health – medical tourism,
  • Distressed healthcare and infrastructure and funding,
  • Lifestyle illness (obesity),
  • Increase in legal profession activity (claimants)

Environmental liability

  • Increased regulatory scrutiny,
  • New areas of exploration,
  • Bigger & bolder projects,
  • Social and geopolitical, tensions,
  • Increased litigation,
  • Legacy issues

Covid-19 and Casualty:

As a recent risk, the impact and potential exposures are changing constantly. This makes it challenging in quantifiable terms. Some of the areas under pressure is D&O cover in companies. This can increase a company’s insolvency and inevitably, all stakeholders become impacted in a strained company. There are cost overruns which should not normally be covered under PI, but there remains a question mark on Covid & Casualty. As with most policies, if there is no exclusion, then it’s covered. You either pay or defend which is still a costly exercise. Lastly cyber risks have increased exponentially as more people worked from home and there are no firewalls in the home environment.

Zaid then closed session and handed over to Carli.

Carli hosted a short Q&A Session.

One of the top questions being that Tesla wants to offer their own insurance for their product and would this become a trend amongst other manufacturers?

If a product is heavily dependent on tech & data, then the company that sits with all the data is in the best position believes they’re in the best position to offer niche type of cover. This may very well become a trend amongst other manufacturers.

Carli thanked the speakers and all in attendance. She also thanked the IIG for the platform and always placing the sharing of knowledge high on its priority list.

By: Asiya Swaleh            

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