Arch executive on D&O challenges

"The claims landscape is constantly evolving"

Arch executive on D&O challenges

Insurance News

By Daniel Wood

Early this month, Louise Lumley (pictured above) started a new role as northern region underwriting manager, executive assurance, for Arch Insurance Australia. Her responsibilities for the firm will focus on financial lines.

Her LinkedIn profile mentioned considerable experience in this space, particularly directors and officers (D&O) insurance, from her work at AIG (American International Group). Insurance Business asked Lumley how she’d summarise D&O’s current challenges?

“Australia is one of the most litigious countries in the world and the claims landscape is constantly evolving,” she said. “Many believe that the recent change in government will also lead to an increased regulatory focus on upholding the rights of shareholders.”

She also highlighted significant emerging D&O risks.

“Emerging risks include greenwashing, where companies make unsubstantiated claims about their environmental credentials and the continued exposure to continuous disclosure claims,” she said.

Last year, the former government made reforms to the continuous disclosure laws permanent. According to the then Treasurer Josh Frydenberg, the changes, which raise the bar for the burden of proof, will discourage opportunistic class actions against company directors, for example, when their economic forecasts are found to be inaccurate.

“While there has been a recent lull in class actions, the long tail nature of the risk means that this situation could change as many class actions take three to four years to surface,” said Lumley. “Class actions continue to pose a clear risk to companies.”

She also said emerging issues such as cyber and climate change have the potential to provide a “plethora of new sources for D&O claims.”

ESG (environmental, social and governance) factors have also come to the fore in recent years. However, Lumley argued that governance has always been a key part of D&O underwriting.

“I would also argue that the social component of ESG has been a core aspect of ethical business practices for a long time,” she said.

Lumley also noted the rising challenge of the environmental component of ESG.

“Environmental imperatives have become increasingly prominent as reporting requirements for areas such as climate change are growing more onerous and expanding in scope, she said.

These challenges will impact her new role at Arch, she said, in terms of how they’re managed in a challenging market environment to ensure ongoing profitable growth in the executive assurance portfolio.

“We are seeing increased underwriting capacity within the market and external risks, such as interest rates, inflation and geopolitical risks, continue to impact the class,” said Lumley.

The new Arch underwriting manager has always had an eye on global issues, partly through an interest in micro-finance that started at university.

“I am excited by the possibilities for micro-insurance to support entrepreneurs in developing countries as a tool of international development, she said. “There are challenges in the system but, at some point, I would be interested in overlapping this passion with my profession.”

Arch has continued to grow in recent years, despite the challenges of the COVID-19 pandemic, a skills shortage and now an economic downturn.

Last month, the firm’s international division appointed David Stallard as new senior cargo underwriter. Before joining the company, he was Lockton’s senior vice president for cargo and logistics.

“With a career history that spans both underwriting and broking, David brings a wealth of experience and technical knowledge that will add significant strength and depth to our cargo and logistics underwriting team,” said Steve O’Gorman, head of cargo and logistics.

In September, the firm appointed Daniel Khalil as its senior underwriter for property. Khalil brings over 17 years of insurance market experience to Arch, most recently as a property production underwriter with Allianz Australia.

Last year, hires included Tom Rivers as new chief risk officer (CRO). Before joining Arch, he was CRO at AXIS Managing Agency for nearly five years.

Arch CEO Hugh Sturgess, highlighted Rivers’ reputation as a “highly respected authority on risk management.”

Also in 2021, Silvia Martinez joined the global insurer as a general counsel. The media release announcing her appointment referred to her extensive corporate governance knowledge and expertise overseeing complex corporate and capital market transactions.

Commenting on Lumley’s recent appointment, Paula Ritchie, underwriting manager for executive assurance, commented on her “deserved market reputation for her dedication to delivering the highest possible service to broker partners, combined with an extensive knowledge of the financial lines sector.”

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