Latest report from Allianz Commercial looks ahead to various challenges next year. There are US banking systems worries, inflation and more. Here are a couple of extracts, plus a link to the full report FYI;
Directors and Officers
Board members and company executives can be held liable for an increasing number of scenarios. Inadequate responses to economic pressures, geopolitical issues, implementing innovative technologies such as GenAI, or environmental, social, and governance (ESG) challenges are among the main factors driving the possibility that a company and its Directors and Officers (D&Os) may be sued in 2024, according to Allianz Commercial’s D&O insurance report.
“Buyers of D&O insurance from public and private companies have benefited from favorable pricing and broader coverage through 2023, helped by factors such as new market entrants and the stable trend in US securities class action filings,” explains Vanessa Maxwell, Global Head of Financial Lines at Allianz Commercial. “However, there is still a lot of risk facing D&Os and their insurers. Inflation continues to bite, influencing future claims through larger settlement values – at a 10-year high – and greater defense costs. The higher cost of refinancing debt is proving a shock. Insolvencies are rising, geopolitical uncertainty is considerable, cyber risk is elevated, and ESG claims are here to stay and proving challenging. D&Os need to be prepared for these headwinds and have a strategy that can adapt when presented with a block to the business. Diversity in the boardroom allows companies to have varied approaches to such problems.”
Gloomy outlook prevails
Since the world eased out of lockdown from the Covid-19 pandemic, a new normal has not made daily challenges for companies any easier. Economic growth across the globe remains disappointing. Business insolvencies are expected to rise by +10% in 2024, according to Allianz analysis. Inflationary pressures remain and refinancing of existing debt after years of low interest rates is a new test for many. D&Os are seeing fresh pressure on cash generation, and decisions around how companies finance capital expenditure and manage their debt profiles are under more scrutiny from stakeholders, the report notes.
In addition, businesses and their supply chains face considerable geopolitical risks with war in Ukraine, conflict in the Middle East, and ongoing tensions around the world. Political risk in 2023 was at a five-year high, with some 100 countries considered at high or extreme risk of civil unrest, according to analyst Verisk Maplecroft, meaning there is greater pressure and scrutiny on directors to ensure their company is adequately prepared to withstand the impact of business interruption in higher-risk territories, in addition to ensuring the safety of its employees.
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