While many of you have seen CRS’ Quarterly Updates in the past, we thought there was a need to provide an interim update to add some focus around emerging trends we’ve seen developing.

Before doing so, we wanted to again recap the specific cost drivers of the hardening insurance marketplace to set the stage for review of other trends:

• Years of carrier’s underpricing, reducing retention/deductible and premium levels coupled with broadening of coverage grants, with the lowest interest rates in over 20 years, leading to inability for carriers to make any investment income on premiums received, which has all led to the re-balancing of many carriers’ books of business;
• Record-setting losses (each year for 8+ years) arising from natural disasters (between $1-5B each per event/per year) including floods, CA fires and mudslides, hurricanes, tsunamis, and other storms or surges; and
• Increase in severity & frequency of event-driven litigation and claims stemming from the #MeToo, Securities Derivative Actions, Cyber Breaches, Cancellation/Delay Insurance of Events due to COVID-19 (ie Olympics, Wimbledon, Golf, Concerts etc), #RiseUp movements, as well as spike in bankruptcy / creditor claims.

Further to the sobering impacts of litigation costs within the insurance marketplace cited above, there are a few specific areas of risk that are evolving, almost day-by-day, in the past several months:

D&O (Director & Officer Insurance)
The D&O insurance marketplace has continued to experience dramatic increases in premium and retention/deductibles levels along with material constriction in carrier capacity available overall, with particular relevance and impact to publicly-traded firms, especially in certain sectors (ie life science, healthcare/therapeutics, oil/gas, retail and hospitality). Premium and retention level increases are even more acute for publicly traded companies, within the first 3 years following an IPO.  Most material impacts have been seen in the U.S. and Australia primarily due to shareholder litigation and litigation-finance firms. In the first quarter, premium rates increased on average 44% to 104% in the U.S. and 225% in Australia. In response, companies are raising their deductibles, reducing limits and more often deciding to become ‘self-insured’. Shareholder lawsuits due to Covid-19 are on the rise, as are cyberattacks; and it is now a “Board-level” discussion for company executives to (a) respond, guide and protect employees during the pandemic and as they return to work, and (b) be breach-ready with specific business continuity plans and actionable steps to protect the company’s enterprise value in event of a cyberattack.  Support to the above, is found in the attached article:
The Wall Street Journal – Companies Are Paying a Lot More to Insure Their Directors and Officers

SRCC(Strike, Riots, Civil Commotion)
Given recent social unrest and riots / looting that have ensued globally, in particular following the wrongful death of George Floyd, again, the insurance marketplace has experienced a shift. SRCC exclusions are anticipated to be enforced at renewals to limit insurance carrier’s exposure on property accounts. In certain countries, such exclusions have become ‘standard’ in the past year, due to severe economic and physical loss caused by civil disturbances throughout 2019. Further shifts in policy structure may occur as well (ie property policy protection on a per location rather than per occurrence basis). Further description of evolving property impacts due to SRCC is found below:
The Insurer – Ark, TMK and Faraday amongst Lloyd’s syndicates imposing SRCC exclusions

GDPR(General Data Protection Regulation)
We are seeing an uptick in regulatory enforcement and fines for data violations globally, especially in the recent months; and have added up to over 114 million euros so far in 2020 with most fines coming from France, Germany, and Austria. The biggest largest fine is still the 50 million-euros charged to Google last year. Read more on the anticipated enforcement of GDPR and other cyber/data regulation around the globe:
Insurance Journal – EU Privacy Regulators Expected to Raise Fines Under GDPR Data Protection Rules