2021 crystal gazing with Clyde & Co.
Helping players across the insurance value chain get ahead of upcoming hurdles, Clyde & Co. highlights the trends to watch as we await the calendar’s turn.
With 2020 playing out like a Don DeLillo plot, outlooks for 2021 are naturally rosier and Clyde & Co. LLP have predicted increasing premiums and improved projections for most lines of business.
While insurance market conditions in 2021 are expected to rally, in turn drawing more capital into the industry, the coming year, like any other, will not be without its challenges. What follows are Clyde & Co.’s emerging insurance trends to watch next year:
InsurTech comes of age
In 2020, InsurTech raised a record $2.5 billion in new capital globally, demonstrating a growing interest among insurance firms to automate and enhance services through technology and artificial intelligence.
“We believe that 2021 will see a consolidation in the areas where tech has already made inroads, including auto insurance, and an expansion into new areas currently largely untouched by technology but in which remote working and digital tools are beginning to take hold,” Lee Bacon, a Clyde & Co partner, told PropertyCasualty360.com.
Clyde & Co. is also expecting overall industry M&A activities to increase in 2021, and PropertyCausualty360.com spoke with the company to get a deep-dive into what will drive the anticipated stampede of transactions.
Ransomware risks continue growth
Cyber incidents saw significant growth in 2020; the third quarter alone saw an increase of 40%-50% in the average number of daily ransomware attacks compared to the first half, and Clyde & Co. expects that to continue in 2021.
Not only are cyber incidents anticipated to continue to grow in volume, but also in maliciousness and cost. Clyde & Co. projects that 2021 will also see threat actors increasingly turning to physical threats, such as damage to computer systems, or even more dire situations such as seen in 2001 when hackers released raw sewage into parks and rivers in Australia or the 2014 German steel plant explosion.
D&O policy claims driven by disease, diversity
Social justice activism and the COVID-19-driven recession will be key themes for claims next year, the global law firm reported.
Regarding economic issues, expect an uptick in shareholder suits against companies and boards that haven’t adequately reflected the realities of the pandemic in their financial disclosures and guidance.
On the social justice front, Clyde & Co. suggests boards ensure they are living up to their diversity and inclusion statements.
“Failure to do so in the wake of several high-profile, racially-charged events in
2020 have already lead to D&O litigation and will undoubtedly continue to lead to exposure,” wrote Katelin O-Rourke Gorman, a Clyde & Co. partner.
Greenwashing comes under scrutiny
Regulators around the globe are expected to take tougher stances against greenwashing, the practice of making unsubstantiated or misleading claims about the environmental status of a business or its products, practices and services.
Greenwashing is being closely watched because ESG stocks, which are perceived to perform better against environmental, social and governance metrics, are demonstrating stronger market performance and attracting high-levels of investor interest. This is leading the SEC to examine how to improve ESG and climate change financial disclosures, with a final report on the matter expected in 2021.
Clyde & Co. noted businesses that get green initiatives right will be rewarded with attention from insurers from liability and investment perspectives.
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