Swiss Re hosts 6th International Liability Regimes Conference

Insurance industry experts discuss challenges and opportunities resulting from the changing global liability landscape.

Under the auspices of the Geneva Association, some 40 experts from both reinsurance and insurance gathered at Swiss Re’s Centre for Global Dialogue on 26-27 October 2009 to look into the dynamics developments of the liability landscape. Participants included representatives from Munich Re, Zurich Financial Services, XL Insurance, Allianz, Axa, SCOR and Lloyd’s.

Participants agreed that the financial crisis of 2008-2009 has accelerated some of the developments in the liability landscape. From an insurance perspective, a D&O and PI business lines are particularly impacted, as witnessed by a first wave of SEC related claims. However there was a large consensus among the experts that the regulatory impact from the crisis on liability regimes in general would remain moderate.

The global evolution of liability regimes is driven by factors such as:

• Introduction of collective redress mechanisms to improve access to justice
• Changing acceptance of one’s fate results in an increasing willingness to sue
• Product liability developments lead to facilitated access to compensation
• Environmental Liability Expansion tends to extend liability to new areas

When looking into the effects of the financial crisis, participants said that, based on past experience, in many countries, a single high-impact event had often triggered national legislation to introduce collective redress (such as the Fortis case in the Netherlands or the Deutsche Telekom case in Germany). Similarly, one consequence of the financial crisis may be that the increase in shareholder lawsuits with many plaintiffs will speed the introduction of collective redress schemes for such cases into European legal systems.

The fact that collective action and redress schemes are indeed spreading rapidly around the world is illustrated by the recent launch of a public consultation process by th HongKong government, by the tabling of a draft law on collective redress by the Belgian government, and by the introduction of similar legislation in Poland and in Italy.

Drivers of litigation known from Western countries are also increasingly at work in Asian countries, such as India, where consumer fora increasingly encourage action from consumers. Also the growing internationalisation of many Indian companies leads to increased exposure to liability claims that may emerge from claimants outside of India. One downside of the sprawling tourism and business traffic is a raise in liability claims on hotels. Given the still very low levels of liability insurance penetration and density - with liability premium only 2.24% of Gross written premiums – the Indian market has a huge growth potential.

Participants agreed that the very dynamics of the liability landscapes, combined with the heterogeneity of civil justice systems around the world, provides a challenge to insurers in monitoring and assessing these developments. Also, the insurance industry clearly has an interest in actively participating in the legislative dialogue in order to explain how unbalanced systems of collective redress could affect the availability of liability insurance.