Navigating the volatile management liability space
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The COVID-19 pandemic set off a chain-reaction of economic and social crises that have led to an extremely volatile insurance environment. Mark Paccione, head of commercial management solutions at AXIS Insurance, told IBA that spiking inflation, high capital costs, supply chain issues and staffing shortages are all ongoing concerns for businesses.
“We’ve got challenges to face, we’ve got portfolios that we’re watching,” Paccione said. “We’re looking at our clients and trying to look for stress cracks with regard to the financial distress of their companies, which would cause a certain number of claims.”
Richard Bryant, president of underwriting at Prime Insurance, said the market environment might get worse before it gets better as economies try to recover post-lockdown.
“There are companies that have been helped through the economic storm by governments,” Bryant said. “Is that help going to be withdrawn, and is that going to cause other issues? Nobody really knows what’s going to happen, but it’s not necessarily looking good.”
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However, Bryant pointed out that volatile markets aren’t new to the insurance industry.
“If you look back to the 1980s, when we had similar situations – rising interest rates and galloping inflation – the industry had a major change,” he said. “Are we heading towards that? I think possibly.”
Stephen Swartley, chief underwriting officer and senior vice president of executive assurance at Arch Insurance, said the knock-on effects of the pandemic have created a situation ripe for securities class-action (SCA) litigation.
“Some SCAs are based on those patterns, like a company had an earnings miss based on a supply-chain issue and they get sued,” Swartley said. “We’re seeing activity there, and we’re going to see more of that.”
While there has been a recent drop in SCAs, Bryant warned that insurers should not become complacent.
“We can’t sit back and say, ‘Things are looking good – look at the last two years,’” he said. “We need to look at the last 10 to 20 years, and then also try to look into a crystal ball and say, ‘How are things going to develop over the next two, five, 10 years?’ It’s a long-term play.”
For the entire roundtable discussion, click here.