Australia Policyholder Highlights
Click here to download our 2023 report
31 Jan 2024
Insight
This unique publication focuses on business implications and learnings for insurance policyholders, including:
- Cyber risk, including cyber insurance, must be front of mind for all corporates and directors: 2023 saw a slew of high-profile cyber incidents, as well as legal and regulatory consequences for corporate Australia which will continue into 2024. Cyber resilience is a clear target for regulators and, as a result, litigation funders and plaintiff law firms. Cyber insurance remains a complex product given its relative immaturity, but the right policy can provide important protection for costs involved in responding to a cyber incident, and the liabilities which may follow – however, the product needs to be fit for purpose in the context of the high stakes and time critical nature of a cyber incident.
- Risk increasing, but Directors’ & Officers’ insurance market recovering: as reported in previous editions of Policyholder Insurance Highlights, the Australian market experienced a 3-5 year period of significant volatility and increased premiums, largely off the back of very significant liabilities arising from securities class actions which could not be funded from the available premium pool. The risks in relation to securities class actions, as well as other forms of class actions to which financial lines insurance may respond (e.g. consumer claims in relation to financial products), remain. Regulatory risk for individual directors also appears to be on the increase, with regulators focused on enforcement outcomes, particularly in relation to cyber and climate change. However, despite this, there have been reports of significant premium decreases at recent D&O renewals – in the region of 20-30%, and as high as 50% – coupled with reductions in deductibles. Given the actual (or perceived) increase in underlying D&O risks, these reductions appear to be a function of the insurance market cycle with new capacity (more insurers) increasing competition and driving down prices. It is hoped that the D&O market is able to achieve greater stability going forward, rather than experiencing the well-publicised volatility of recent times.
- Claims disputes and delays on the rise: our observation, borne out by the numbers of judgments and cases currently progressing through the Courts, is that insurance claim disputes are on the rise. This may be a function of various things, including rising overall claim costs both as a result of increased frequency and severity, as well as the effects of inflation, and therefore an increased willingness to progress to litigated outcomes. Policyholders should use renewals to ensure their policy wordings clearly reflect the expected and intended coverage for the business (to seek to reduce the scope for dispute), and consider engaging advisers on claims at an early stage if there is potential for a dispute to arise.
Key contacts
Legal Notice
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2024
Stay in the know
We’ll send you the latest insights and briefings tailored to your needs