COVID-19: Allianz report raises concerns on impact of Claims on insurance market
Allianz Global Corporate & Specialty (AGCS) in its report “Financial Services Risk Trends: An Insurer’s Perspective” released recently identified COVID-19, cybercrime, compliance to corporate governance and Environmental Social and Governance (ESG) as top risk concerns for financial services sector.
The AGCS report also highlights some of the major causes of claims that insurers see from financial institutions. The fact that compliance risk is growing is concerning, as compliance issues are already one of the biggest drivers of claims.
This was contained in a statement by Allianz AGCS Spokesperson in Johannesburg, South Africa, Lesiba Sethoga, made available for this medium,
According to Shanil Williams, Global Head of Financial Lines at AGCS, “Keeping abreast of compliance in a rapidly-changing world is a tough task for companies and their directors and officers, adding that their compliance burden is enormous, and is now accompanied by growing regulatory activism, legal action and litigation funding.”
“Cyber incidents already result in the most expensive claims and insurers are seeing a rising number of technology-related losses including claims made against directors following major privacy breaches. Other examples include sizable claims related to fraudulent payment instructions and “fake president” scams. Such payments can be in the millions of dollars.
“AGCS has also handled a number of liability claims arising from technical problems with exchanges and electronic processing systems where systems have gone down and clients have not been able to execute trades, and have made claims against policyholders for loss of opportunity. There have also been claims where a system failure has caused damages to a third party; one financial institution suffered a significant loss after a trading system crashed causing processing failures for customers.
“Recent loss activity, compounded by Covid-19 uncertainty, have contributed to a recasting of the insurance market for financial institutions, characterized by adjusted pricing and enhanced focus on risk selection by insurers, but also a growing interest for alternative risk transfer solutions, in addition to traditional insurance.
Insurance is increasingly an important part of the capital stack of financial institutions and a growing number are partnering with insurers to manage risk and regulatory capital requirements or utilizing captive insurers to compensate for changes in the insurance markets or to finance more difficult-to-place risks.
Paul Schiavone, Global Industry Solutions Director Financial Services at AGCS stated in the statement “At AGCS, we are committed to engaging with financial institutions to help them mitigate their exposures and develop adequate risk transfer solutions for a sector that is embarking on a major transformation, driven by fast-paced technology adoption and growing ESG issues, while having to master the impacts of the Covid-19 pandemic.”
