Allianz Lists Top COVID-19 Liability Risks For Insurers

By Irene Madongo
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Law360, London (September 9, 2020, 2:28 PM BST) -- Costly legal action, an increase in car recalls by manufacturers and riots are among the five main challenges that insurers and their clients face as they attempt to weather the COVID-19 pandemic, insurer Allianz said on Wednesday.

Liability exposures, or legal risks, for businesses are increasing and the market is challenging for clients, brokers and insurers, Allianz said in a study that outlined some liability trends that the sector faces.

One of those five trends is an increase in collective redress or class action, which it linked to a rise in litigation funding, a form of legal financing.

"Litigation funding is not only on the rise in the US, but also in the U.K.., Europe and elsewhere around the world, contributing to a growing trend of collective redress as hurdles for consumers are lowered to embark on class actions," the insurer said about its findings.

Rising automotive repair and recall costs, such as in the U.S. and Europe, was identified as another trend. According to the study, the number of recalls in Europe reached 475 in 2019, making it the highest figure for a single year in the last decade. There were 966 safety recalls affecting more than 50 million vehicles in the U.S. the same year.

"Pricing in the liability insurance market may have turned in recent months. However, social inflation trends and large court verdicts continue in the United States," Ciara Brady, global head of liability at Allianz Global Corporate and Specialty, said.

These factors, combined with problems such as an increase in automotive part recalls, are putting pressure on liability insurers, Brady added.

Liability insurers provides cover for claims by policyholders from damages to other people or their property, covering legal costs and payouts that an insured party may have to pay.

Other trends identified by Allianz include riots and civil unrest, such as the "yellow vest" protests in France and the recent race protests in the U.S.

Insurers are assessing the financial damage caused by the virus, which is set to cost them billions of dollars. Brand Finance, an independent consulting group, found in May that the world's top 100 insurers could lose up to $100 billion in the value of their brands as a result of the virus.

Reinsurer Munich said in July that it had suffered a €700 million ($825 million) hit as a result of the COVID-19 outbreak.

--Additional reporting by Lucia Osborne-Crowley and Martin Croucher. Editing by Ed Harris.

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