Global Insurance Market Facing a Combination of Climate, Artificial Intelligence and Regulatory Challenges, GILC

A new Global Insurance Law Connect (GILC) report shows that natural disasters linked to climate change, cybersecurity, artificial intelligence (AI) and consumer protection regulations are the “biggest challenges” facing insurers in 2024.

GILC’s annual Risk Radar report is a collection of insights from law firms in 27 different countries. Each company describes in detail the most important changes in the insurance market in its region and presents forecasts for the coming year in that country.

The report, focusing on the US insurance market, says it is at a critical juncture, “grappling with multi-faceted challenges arising from climate change, infrastructure vulnerabilities and growing cybersecurity threats.”

In particular, climate change continues to pose a variety of challenges due to the increased frequency and severity of natural disasters.

“As a result, insurers are under pressure to adapt their risk management strategies, integrate climate science into underwriting practices, and work with policymakers to develop sustainable solutions that ensure insurance affordability and availability in a changing climate landscape,” the report said. .

Regarding the UK, GILC noted that this is an “intriguing time” for the UK insurance market. The company explains that in the industry, traditional insurers compete with managing general agents (MGAs) from jurisdictions such as Bermuda who offer cover at competitive rates.

However, the number of notifications of circumstances that could give rise to claims is increasing, as is the severity and frequency of claims, the report explains.

Another key insurance market to address is Brazil, which GILC says is experiencing a critical moment of transformation due to the development of the insurance industry, the emergence of artificial intelligence and the consolidation of the long-term effects of the opening of the reinsurance market in 2007.

Moving towards Australia, GILC notes that Australian insurers continue to strengthen their cyber defenses and embed cyber resilience into operational and strategic decision-making processes.

Australian insurers are said to be investing in protecting their business and customers and protecting confidential information.

GILC said insurers across Australia are using artificial intelligence to improve market operations, as well as to help with pricing, claims management, underwriting, sales, distribution and product design. Additionally, insurers are implementing chatbots and virtual assistants to help reduce time-consuming human input.

Another country worth highlighting is Germany, where cyber risks still remain a dominant topic on the domestic insurance market, especially in the area of ​​directors and officers (D&O) insurance.

Additionally, GILC stated that supply chain issues will continue to be a concern for insurers and policyholders in the German insurance market in 2024 and beyond due to terrorist attacks, particularly in the coastal regions of Yemen and Somalia.

Gillian Davidson, chair of Global Insurance Law Connect and partner at Sparke Helmore, commented: “We continue to see the emergence of major trends that are transforming the insurance industry in every market and having a significant impact across the world. The report shows that insurers in almost every market are grappling with climate-induced disruption, responding to increased cyber vulnerabilities and leveraging the innovation potential of artificial intelligence, all in a context of increased geopolitical risk.”

It added: “A new theme in this year’s report is a focus on the regulatory and compliance challenges insurers face in relation to consumer protection. Customers want a fully customized and personalized experience, and regulators are pushing for a greater focus on customer interests. They want greater transparency, stricter regulation of insurance practices and fair treatment of policyholders.”