Environmental class actions. Pandemics. ESG principles. These were some of the topics of discussion at Norton Rose Fulbright’s second annual insurance seminar, Future Ready – Sustainable Cities, held in Sydney on 3 February.
The rise of the ‘megacity’ – cities with a population of over 10 million people – was the springboard for the lively panel discussion. While there were 36 megacities in 2015, the United Nations predicts there will be 41 megacities by 2030. And while around 50% of the world’s population currently live in cities, it’s estimated that this figure will increase to 70% by 2050.
How will these changes affect the insurance market?
With rapid urbanisation, many people will increasingly be congregated within confined spaces, and this creates a vast number of issues for businesses to consider, including:
- Fierce global competition for talent, resources and investment.
- Rapid spread of illness and disease, presenting the risk of pandemics.
- Natural disasters will have the potential for a more severe impact.
- How to control pollution, congestion and waste.
- Shareholder activism: while directors will continue to be expected to return value to shareholders, shareholders and the public will increasingly expect profits be earned in a sustainable and ethical way due to limited natural resources.Added to these is the impact of technology: ready access to information leads to a more aware and empowered public who want more influence over business and government.
The panellists comprised a diverse range of experts across the insurance, legal and corporate sectors:
- Amanda Harkness: Group General Counsel & Company Secretary and Group Executive, Corporate Affairs of the ASX Group
- Andre Louw: Chairman, Jardine Lloyd Thompson Australia
- Chris Mackinnon: Lloyd’s Australia Country Manager and Lloyd’s General Representative in Australia
- Vanessa Maher: Senior Vice President – Claims & Technology at Liberty International Underwriters
- Nick Abrahams – APAC Technology Practice Group Leader at Norton Rose Fulbright
- Simon Currie – Head of Norton Rose Fulbright’s Global Energy Practice
The panel discussion was moderated by Tricia Hobson, Head of Insurance for Australia and Asia Pacific at Norton Rose Fulbright and Chair of Australia and Global Vice Chair.
Some interesting messages from the panel included the following:
New P2P startup Lemonade isn’t big enough at this stage to be considered a real disruptor to the insurance industry. But P2P is interesting generally because the broader industry can learn from it, and Lemonade creates an opportunity for the insurance market to improve the way it operates.
Although all insurers are collecting data, they are on a steep learning curve as to how to use data analytics in order to make better business decisions.
It’s only a matter of time before we have an environmental liability class action in Australia. Given that so many people care deeply about the environment, communities of like-minded people (locally and/or globally) may contribute funds in order to crowdfund a class action around climate change.
ESG (environmental, social and governance) principles are top of Boards’ minds and the rise of megacities will create a difficult road for directors due to increased expectations.
D&O underwriters are looking for companies with good ESG practices because that makes them a better risk. Companies with poor ESG practices are more likely to start failing, opening the door for class actions.
Cyber risk continues to be difficult to understand. Although there’s greater awareness of cyber risk and it’s easier to sell cyber policies that in was a few years ago, having adequate cyber cover is a significant issue for directors.
In short, the global and local insurance industries are facing profound challenges. But even with the potential for pandemics and solar storms, it’s not all bad news. Our rapidly-changing world creates untold opportunity for innovation in the insurance market.
As one of our underwriter clients commented after the seminar: “Any reservations about our greater purpose in the insurance industry can be allayed by a seminar like this. I left feeling hopeful for the future and excited by the potential of our industry”.