A new report from professional indemnity (PI) insurer Allianz Global Corporate & Specialty (AGCS) identifies a number of emerging liability trends for companies, ranking them by level of anticipated impact, potential drivers of loss activity and the likely ease with which these risks may be mitigated. Impacted professions include management consultants, auditors, accountants, architects, engineers, solicitors and lawyers, and media executives, all of whom may be held responsible for losses that arise from a perceived breach of their duties.
“Although exposures vary, all these professions face a wide range of civil liability exposures which need to be adequately addressed and mitigated. These could range from accusations of negligence or omissions resulting in harm or damage to the client, to misrepresentation, to failure to identify fraudulent activity, to the unintentional breach of contract, intellectual property rights or confidentiality, and regulatory investigations and actions,” says Diego Assef, Head of the Global Practice Group, Professional Indemnity Claims at AGCS.
Building safety laws and digital dangers
AGCS’ global PI claims experts identify and rank 11 emerging trends in the report with some professions being more exposed than others depending on the risk and the nature of their business.
Evolving legislation related to building safety and cyber crime, social engineering and data loss, are both ranked #1 (very high – a critical impact to operations or loss severity could be expected). Although building safety has predominantly been a UK issue following the Grenfell Tower fire tragedy in 2017 some impact will be felt globally too the report notes. In the UK, extended liability periods for building and fire safety defects could bring new legal claims against manufacturers and suppliers, with a potential domino effect on all specialists in a construction project, such as architects, engineers and design and build contractors for example.
Cyber-attacks have increased in recent years – and professional services firms are highly exposed due to the proprietary customer data and intellectual property they process or operate with. For example, cyber mercenaries are increasingly targeting law firms in order to illegally obtain confidential or protected data that could tip the balance in courtrooms. These so-called ‘hackers-for-hire’ provide technical capabilities and deniability of involvement in the cyber-attack should it be discovered.
Prepare for volatility and unexpected impacts from inflation and new tech
Among the other risk trends examined in the report are geopolitical, economic and market volatility (ranked #3 – moderate impact to operations or loss severity could be expected). The report notes that regulatory exposures can arise for professionals acting for clients who may potentially be caught by a rapidly evolving sanctions regime, while for construction and design professionals, disruptions to supply chains could bring claims relating to project delays.
The inflationary environment also ranks as a #3. If inflationary pressures lead to recessionary conditions, there could be a myriad of potential exposures for professionals, including insolvency-related exposures for auditors and insolvency practitioners, lenders’ claims for solicitors and valuers, and claims arising from due diligence against lawyers and accountants, according to the report. Outside of recessionary conditions, financial services professionals may face mismanagement and suitability allegations relating to funds negatively impacted by high inflation.
At the lower end of the risk rankings scale, but not to be underestimated, is the use of new technologies such as AI tools by professional services firms (ranked #4 minor impact).
PI claims – most impacted professions
The report also notes that over the past 20+ years AGCS has processed and handled over 90,000 PI claims globally with a total value of €2.2bn. Analysis shows that for large losses (€1mn+ claims only), solicitors/lawyers are most impacted (30%), followed by construction professionals (27%).
Link to report:https://www.agcs.allianz.com/news-and-insights/reports/professional-indemnity-insurance-claims-2023.html
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