Top insurance news stories that dominated headlines in 2020

Top insurance news stories that dominated headlines in 2020 | Insurance Business America

Top insurance news stories that dominated headlines in 2020

The following is an editorial by Alicja Grzadkowska, senior news editor at Insurance Business. To reach out to Alicja, email her at [email protected]

This year will go down in infamy as one that changed the course of the world and exposed it for the first time since the First World War to a global pandemic. However, that’s not the only story that impacted the world of insurance this year. In this wrap-up of the biggest insurance stories from 2020, Insurance Business explores the many developments that dominated our headlines over the past 12 months.

Coronavirus pandemic

COVID-19 has affected the operations of all industries and has had very specific implications for the insurance industry. As lockdowns around the world halted businesses in their tracks, sometimes for months on end, commercial insureds turned to their business interruption insurance to seek coverage for losses, often discovering that there was no coverage to be found. Lawsuits followed, with significant differences in regions around the world on how courts have decided on BI coverage so far, and whether it in fact responds to the pandemic risk and related civil authority shutdowns.

Read more: Should insurers fear this second wave of coronavirus lockdowns?

A key issue that has arisen from the BI coverage discussion has been the need to find a solution for future pandemics. In the US, the Pandemic Risk Insurance Act of 2020 (PRIA) has taken top spot in these conversations, though some insurance industry representatives and Congress members have expressed their reservations on the measure. PRIA aims for the establishment of a government-administered insurance backstop that would pay for business interruption claims related to a pandemic. Once the Pandemic Risk Reinsurance Program is established, participating insurance companies will annually pay deductibles to fund the program. The bill also provides for the treatment of existing business interruption insurance policies resulting from the COVID-19 pandemic.

While PRIA has been the most formal solution proposed around the world, other countries have called for further government support to support businesses during pandemic lockdowns, bringing up the question of how governments and private insurance industry should split the burden of losses from this type of event.

The impacts of the coronavirus will continue into next year, as vaccines roll out and more BI lawsuit decisions come down, making COVID-19 the most significant insurance story of this year – and likely, many years into our future.

Intensifying risks put pressure on hardening market

COVID-19 has likewise exacerbated some of the challenges that already existed in certain lines of business before the pandemic hit. Directors and officers (D&O), property, and financial lines all continued to see rate increases this year, while experts are predicting that historically soft buyers’ markets, like cyber and workers’ compensation, are about to get harder.

Notably for the property insurance market, the Atlantic hurricane season in the US was the most active and seventh costliest on record, while globally, insurance industry losses from natural catastrophes and man-made disasters globally totalled $83 billion in 2020, according to preliminary estimates by the Swiss Re Institute, making the year the fifth costliest for the industry since 1970.

Even if a line of business hasn’t yet seen significant and/or ongoing rate increases, the new risks that have come from the pandemic are likely to present hurdles for insureds either way. The move to remote work, for instance, has been heralded by cyber professionals as a development that has opened up cyber exposures, amid an already risk-laden cyber landscape that saw universities, tech companies, and government agencies, among many other entities worldwide, targeted by cyberattacks.

In fact, ransomware attacks increased in both severity and cost this year compared to 2019, and are now the biggest cyber threat facing organizations, reported specialist insurer Beazley – making this risk an important news story that will continue to appear in 2021, alongside the many other intensifying risks that impacted insureds, and in turn insurers, over the course of 2020.

Deals, deals, deals

Just because there was a global pandemic raging doesn’t mean that insurers stopped taking part in M&A activity. The biggest deals of the year included the long-time coming Aon-Willis Towers Watson merger announced in March of this year, when the duo revealed an agreement to merge their operations in an all-stock transaction with an implied combined equity value of around $80 billion. The combined company will take on the Aon name and will become a technology-enabled global professional services firm focused on risk, retirement, and health.

Other major deals from 2020 included the acquisition of RSA Insurance Group’s British insurance business, led by Intact Financial, which totaled £7.2 billion and, subject to shareholder and competition authority approval, is expected to close in the spring. Denmark’s Tryg A/S is meanwhile taking RSA’s Swedish and Norwegian operations.

These deals, and many other smaller ones that occurred over the past year, are particularly meaningful right now, as the insurance industry looks to reinvent itself and adapt to the challenges presented by the coronavirus as well as other emerging risks, according to Deloitte’s 2020 insurance M&A outlook, which added that M&A is set to have a “strong influence in shaping the ‘next normal’ environment” for insurance over the coming years – as have the other major developments that kept insurance professionals on their toes during 2020.