Surfacing Emerging Risks From Covid, Cyber, Civil Unrest, Mergers, and More…

By and | February 8, 2021

Insurance Journal examined industries experiencing changes and challenges due to the COVID-19 pandemic, societal unrest and other market forces experienced in 2020. Here are 10 industry sectors that could see new and emerging risks in 2021 and beyond.

Commercial Real Estate

Real estate owners are dealing with tenants who cannot pay rent. Some tenants are going out of business due to pandemic related shutdowns, while others are ending their leases as they maintain a work from home structure for their employees. These trends are shaping the future of the commercial real estate market.

Wes Robinson, national property brokerage president of RPS, says there is endless discussion about what the corporate real estate footprint will look like in the not too distant future.

“This, of course, will depend on corporate management philosophy, job/industry description and geographical presence, but there is a fair amount of certainty that an abundance of office space will soon be available,” Robinson said. “Perhaps that gets filled with more and more businesses, but a likely alternative is to repurpose that space for other occupancies.”

As an example, if a company decides to vacate a high-rise building in New York City, the landlord has a decision to either do their best to fill that space with another office tenant, or perhaps convert that space to a hotel, apartments or condominiums.

“This may be something risk managers, insurance agents and brokers, and underwriters will need to tangle with more and more as these decisions come due in the months to come,” Robinson told Insurance Journal. The implications for insurance is that the insured may ultimately be presenting a different risk than what was originally underwritten for and affecting multiple lines of coverage.

There are some important concerns that may need to be addressed that will present opportunities for insurance professionals in the future, he said.

“Builders risk and liability insurance for the actual construction of the renovation will need to be placed,” he said. “The more structural components are affected, the more costly and expensive the coverage will be.”

Office space typically carries a low property/casualty rate. “If space is converted, that will come with a higher exposure base from both a property and casualty perspective,” he added. Restaurant/bar additions, exercise gyms, ballroom/convention space, and an increased public foot traffic are all exposures the carriers will want to rate for, according to Robinson.

From a casualty perspective, office space is rated on square footage while restaurants are rated based on sales. Hotels and apartments are often rated by the number of rooms. “A consistent methodology will need to be determined for proper rating and premium generation,” he said. “Additionally, past loss history may not be indicative of future performance if core operations may be changing or introduced to the program.”


The COVID-19 pandemic has had a huge impact on the specialty insurance industry especially the entertainment and event insurance markets.

According to Thomas Sepp, chief claims officer at Allianz Global Corporate & Specialty (AGCS), the pandemic is one of the worst loss events for the insurance industry in history — claims could be as high as $110 billion in 2020, according to Lloyd’s estimates. AGCS alone has reserved about $571 million for expected COVID-19 related claims.

The entertainment and events industry has been one of the hardest hit industries, with lockdowns and safety concerns over COVID causing the cancellation of countless live events and sporting events, as well as the closure of theaters, cinemas and theme parks. Film and TV production has stopped, restarted and at times stopped again.

The cancellation or postponement of events and productions is one of the largest sources of COVID-related losses for the global insurance industry, bringing a surge in claims. Unlike traditional lines of insurance, it was not uncommon for entertainment policies to write-back cover for infectious diseases, AGCS says.

A common concern is on-again/off-again production and the added cost that brings to the production. Another issue is coverage availability.

According to EPIC Insurance Brokers, an ongoing issue for all entertainment production remains securing insurance for projects. “Lenders require it, and with the pandemic raging, it has been increasingly difficult to obtain,” EPIC says. The cost of insurance can be too much for some independent and smaller producers to pay, where policy premiums can at times exceed $400,000.

For now, the entertainment industry globally is projected to lose $160 billion of growth over the next five years. Hollywood has gone from 2019’s record-breaking $42 billion in worldwide box office sales to its worst year in 20 years.

The good news is that productions are picking up, John A. Hamby, senior managing director, national entertainment practice leader, told Insurance Journal. All have new COVID protocols. “While there are some productions starting now and very soon, the majority are waiting until summer or later in hopes that things will be better then,” Hamby noted. “Overall, the risk profile of production companies is evolving, and will continue to evolve this year as things get better,” he said.

Employer Liability

Insurance rates for employment practices liability insurance are continuing on an upward trend, in part because commercial rates in general are on the rise, but more specifically due to COVID-19 and ongoing litigation concerns over the #MeToo movement.

2020 shined new light on the importance of EPLI coverage and emerging exposures such as a hybrid workforce and a focus on diversity and inclusion practices, as well as possible vaccine mandates could lead to further changes in the market.

Jordan Kurkowski, vice president and professional lines broker with AmWINS Brokerage in Grand Rapids, Mich., says an employer’s risk today is heightened by both increased public intolerance for harassment and instant, worldwide distribution of news through social media.

Last “year has been a whammy of layoffs, severance packages, furloughs along with the riots of Black Lives Matter and the #MeToo movement,” Kurkowski said. “It’s an underwriter’s nightmare.”

EPLI claims often follow large changes in workforce, including reductions, promotions and demotions.

“There is more of that happening during this time period with massive unrest in our country,” he said. “We’ve seen political and religious beliefs trigger some of these claims, too.”

Remote work, or a hybrid work model that includes both remote workers and in-facility workers, can present some concerns when it comes to employer liability issues. Employees might have trouble maintaining a positive work-from-home environment and such challenges could lead to unsatisfied employees. Both employers and employees will have concerns about today’s current workforce dynamics.

In conjunction with COVID-19, a new overtime rule was changed and put into effect at the beginning of 2020, according to an October 2020 blog by Founder Shield’s Jeff Hirsch, head of Product. “It had been untouched for 15 years, so the transition has been complicated. Add in remote work, and employers are scrambling to keep up with the unprecedented shift.”

Hirsch wrote that as more employees educate themselves on old and new wage and hour laws, the industry should expect to see an uptick in employment practices lawsuits. “Plus, remote work often means employees feel ‘on the job’ for more hours than usual — and they want compensation for it,” he wrote.

The largest group of employment related legal disputes — 472 lawsuits, according to Jackson Lewis’ data — are related to disability issues, leave and accommodation claims by employees who were unable to come back to work because they were sick or had to care for someone with COVID-19. “Class actions in general have not come to fruition as predicted,” said Stephanie Adler-Paindiris, a principal at Jackson Lewis in Orlando, Fla., told in December.

During the first six months of 2021, Adler-Paindiris believes there could be a “huge boost of class actions” dealing with systemic discrimination, as employers ask their workers to return to the office and potentially require them to take the COVID-19 vaccine.

Management Liability

The long-term consequences of the pandemic on corporations and their executive leadership will take years to unfold. However, insurers are expecting significant fallout as claims related to the economic turmoil from the pandemic continue to emerge in the U.S. directors & officers (D&O) liability insurance segment.

The good news: there is limited risk to ratings of individual D&O insurers as a result of pandemic-related claims, according to Fitch, noting that carriers with significant D&O premiums are larger, diversified entities. Also, recent pricing changes are supportive of improving profitability post-pandemic, which will depend on the path of the economic recovery.

In 2019, insurance agency Woodruff Sawyer forecasted the rise of D&O premiums — the first increase in nearly 10 years — and predicted it would continue on into 2020 and beyond. Today, the broker says that that rise shows no sign of decline as securities class action lawsuits and record settlements, corporate bankruptcies, and COVID-19 continue to impact an already difficult market.

To add additional pressure, insurers are watching as over 600 unresolved securities class action court cases wind their way through the judicial system, Woodruff-Sawyer says.

Woodruff Sawyer’s 2021 D&O Insurance Trends: A Looking Ahead Guide reveals that underwriters are concerned that their insureds are not fully aware of the high cost of litigation, with 83% of underwriters saying they believe that companies underestimate the current risk. “That doesn’t bode well for insurance renewals for the riskiest clients — recently IPO’d biotech and technology companies — whose volatile share prices often make them targets for shareholder litigation,” the agency says.

Insurance carriers cite multiple factors to justify their underwriting approach and D&O appetite, the report revealed:

  • Securities class action frequency is coming off an all-time high.
  • Suit severity and settlement costs have increased, making excess layers too cheap relative to risk; and
  • Derivative actions are still on the rise with notable settlements tapping “A-side only” insurance.

Civil unrest and social justice problems of 2020 will continue to play a significant role in 2021’s D&O market, says Priya Cherian Huskins, Esq., senior vice president, Management Liability, and editor of Woodruff Sawyer’s report. “We are now starting to see shareholders file breach of fiduciary duty suits against the boards of major corporations for failing to live up to their diversity commitment disclosures.” Cherian Huskins says that a corporation’s approach to social, environmental and governance issues is becoming increasingly more important to stakeholders.


The COVID-19 pandemic has cut into nonprofits’ financial resources while increasing demand for their services, including rising community need for food services, housing assistance and much more.

Almost three out of five nonprofits cut costs last year and more than half expect to continue cutting costs in 2021, according to The NonProfit Times. The 2020 Eagle Hill Consulting Nonprofit Survey, conducted by Ispos, included 505 respondents from a random sample of nonprofit employees across the United States. In recent months, nonprofits have implemented: Program reductions (30%); Hiring freezes (30%); Furloughs (25%); Salary reductions (24%) and Layoffs, 20%. More than four out of five indicated that their organizations changed how they serve constituents, in response to COVID-19.

In the Nonprofit Industry Market Update by Gallagher’s Peter Persuitti, managing director, Nonprofit Practice, many nonprofits are facing 20% to 30% revenue reductions as they continue to work through the current economic and pandemic environment. COVID-19 has increased operating expenses overall.

“Nonprofits of all types and sizes are desperately seeking cost reductions and seriously slashing budgets,” Persuitti said. “It is more important than ever for entities to focus on their total cost of risk and not just the line item of insurance costs. We know that reducing loss prevention or risk management efforts now may result in higher claims later,” he said.

“COVID-19 has not masked the fact that we continue to see plaintiffs pursuing litigation of mostly older Sexual Abuse and Molestation (SAM) claims, and headlines of bankruptcy and cyber breaches for Nonprofits continue,” according to the market update. Several nonprofit insurers are tightening their appetite for certain classes of nonprofit business, and even excluding certain exposures such as foster care, residential services, affordable housing, according the Persuitti.

General liability and auto liability continue to see upward premium pressures. Nonprofit organizations with losses may find it difficult to purchase coverage at any price or may be forced to reduce limits while paying the same or even higher premiums, Gallagher says. Sexual abuse and molestation coverage is another area that is highly scrutinized by underwriters.

The pricing of this property insurance is also rising with most insureds seeing double-digit premium increases, year over year, the Gallagher report noted. Also changing is cyber insurance for nonprofits. While many nonprofits haven’t consider cyber coverage in the past, Gallagher says it has seen sizable losses as more nonprofit staff are working remotely and use technology to solicit donations and manage donor data.

M&A Transaction Market

The mergers and acquisitions market saw record insurance premium in 2020, totaling around $2 billion worldwide, experts in this segment say. The growth of the insurance market aligns with the global growth in M&As as merger activity rebounded last year and a rise in litigation brought an upsurge in new policies, Reuters reported in December.

Many new insurers entered the market, with more than 30 in Europe alone, which pushed down premiums, though M&A specialists speculated that is likely temporary.

“In 2008, you could have probably sat the whole of the London M&A insurance community round a meeting room table,” said Adrian Furlonge, partner at M&A insurance broker Helmsley Wynne Furlonge. “Now there are more than 300 people in that market.”

M&A growth was particularly hot in the insurance industry, with 744 insurance agency mergers and acquisitions in 2020, up nearly 20% from 2019, a report from insurance consulting firm OPTIS partners found.

Private equity buyers dominated the activity and about half of all transactions involved sellers of property/casualty agencies, according to the report.

OPTIS predicted M&A activity will also be significant in the new year for several reasons.

“While it may not be quite as active as 2020, 2021 will probably be very active as a new wave of sellers looking to avoid an expected capital gains tax increase or simply to sell with a growth story emerge. Agency valuations and multiples for high-quality firms should continue to reach new upper limits as demand remains strong and the supply of quality firms is reduced,” said Tim Cunningham, managing partner of OPTIS Partners.


There has been a significant shift in profitability in the cyber insurance market as the changing risk landscape from data breaches and ransomware attacks brings new threats and increasing claims.

A report last summer from AM Best said growth in the market had slowed significantly compared with 2016-2017 when direct premiums written grew by more than 30% annually. While the admitted U.S. cyber insurance market grew by 11% year over year in 2019 to $2.25 billion, the rate of growth was lower than the previous year, marking the fourth straight year of the slowing trend. What grew instead were cyber insurance claims, doubling from 9,000 in 2017 to to 18,000 in 2019.

“Claims are growing exponentially, which will be an issue if prices cannot keep up with rising frequency,” AM Best’s report, Cyber Insurance: Profitability Less Certain as New Risks Emerge, stated.

Best advised carriers to focus on greater clarity in their insurance contracts “to set transparent expectations for themselves and their clients.”

Carriers are also still battling claims from the large-scale 2016 NotPetya breach and the frequency of severity of ransomware attacks is escalating, with the average cost of ransom payments up 104% between the third and fourth quarters of 2019.

The massive cyber breach of several U.S. government agencies and dozens of private businesses in late 2020 by Russian hackers and the COVID-19 pandemic brought new challenges for companies who sent their workers home to work remotely and, in many cases, increased their exposures.

Still, carriers aren’t giving up on this market and risk management will play a key role in minimizing any continuous and emerging threats.

“Cyber risk is definitely still insurable. To suggest otherwise is analogous to saying property risks are not insurable after a bad hurricane season,” Meredith Schnur, Marsh’s U.S. & Canada Cyber Brokerage leader told Carrier Management in January. “The cyber insurance market continues to evolve and expand to meet the changing nature of the risk.”

Municipal Liability/Law Enforcement

Law enforcement and municipalities are among the many segments that have dealt with significant tumult this past year, but in their case, it’s not completely related to the pandemic. Rather, the deaths of Black citizens by white police officers sparked racial justice movements across the country and shined a light on unjust police practices.

Police departments nationwide are under a microscope and compelled to address racial biases within their force.

Policies like police immunity when shootings occur and civil rights violations are being more heavily scrutinized and litigated, with multi-million dollar settlements in some cases.

The City of Minneapolis voted to abolish its police department after the May police killing of George Floyd. The incident sparked international Black Lives Matter protests and calls for police reform. Part of the recommended reforms in Minneapolis include requiring officers to carry their own professional liability insurance.

The city is also facing a lawsuit from Floyd’s family that alleges his rights were violated and that the city allowed a culture of excessive force, racism and impunity in its police force.

In Louisville, Ky., where Breonna Taylor was killed in July by police who entered her home with a “no-knock” warrant while she slept, the city paid out $12 million to Taylor’s family and agreed to enact a series of reforms that seek to improve community relations and prevent future police shooting incidents. Louisville Mayor Greg Fischer called for a true transformation of the Louisville Metro Police Department in response to a report commissioned after Taylor’s death that cited low morale and lack of diversity as perpetuating its problems.

The New York City Police Department enacted new disciplinary rules in January that would terminate officers found to use racial profiling or excessive deadly force.

The legal doctrine known as qualified immunity has worked as a liability shield against frivolous litigation in suits against police officers and the municipalities they work for by making it difficult for plaintiffs to prove excessive force. But after so many high-profile events, qualified immunity has come under scrutiny in the courts, with even some judges questioning its application in excessive force cases. If liability claims against police departments or municipalities succeed, insurers are often on the hook for paying at least part of the settlements, experts say.

The insurance industry is closely monitoring these events and how they will increase exposures in an already risky class. The insurance market has also looked at crafting new professional liability coverage for police officers as some jurisdictions seek to curb police misconduct by requiring officers to carry liability coverage for lawsuits alleging excessive force, a Reuters report stated last summer.

“I think we’re in a new world,” said Mark Turkalo at the insurance brokerage unit of Marsh & McLennan Companies Inc., about the trend. Turkalo said the firm is exploring whether it could develop the coverage.

Some insurers contacted by Reuters privately raised concerns about wading into a political quagmire. They also face a hurdle accessing police disciplinary records, which are confidential in many states, according to legal experts.

“A lot of our clients are asking” about the policies and carriers are working on coverage, said a senior executive at a U.S. insurance broker who was not authorized to speak publicly.


The COVID-19 pandemic lockdown early last year brought the U.S. economy to a screeching halt as many businesses had to shutter in-person services or close their doors altogether. But one segment saw a boost that many are watching closely to see if the trend remains when the pandemic eventually ends.

Home delivery services through app-based platforms like DoorDash and Grubhub, as well as independent contractors delivering groceries or medical supplies, saw a spike in demand as people stayed home and had their necessities brought to them instead.

In response, several insurers, including Allstate, American Family, Farmers, The Hanover, Liberty Mutual, Main Street America, MetLife, and Nationwide, temporarily added or extended coverage for personal lines policyholders using their personal vehicles to make restaurant, grocery, pharmacy and other deliveries. Some states, such as Wisconsin, mandated insurers add the delivery coverage to personal and commercial policies while others, like Texas, Washington and Connecticut, asked insurers to consider doing so. Many insurers, however, voluntarily made the accommodation.

“Property/casualty insurers recognize that American businesses are facing unprecedented disruption,” said David A. Sampson, president and CEO of the American Property Casualty Insurance Association (APCIA).

An analysis by the National Council on Compensation Insurance (NCCI) said the drivers that work with app-based entities are typically independent contractors and not covered by workers’ compensation insurance, thus reducing the risk to insurers. NCCI predicted the surge in demand for delivery services was likely temporary, but in the warehousing and overall transportation sector, NCCI predicted an uptick in injury frequency was likely in 2020 because of the increased demand for delivery services.

The effect on the commercial auto space could be more significant. AM Best said in a July report that less road traffic during the COVID-19 pandemic may give commercial auto writers some breathing space from the high frequency and severity levels the segment has been experiencing for years, claims from meal or grocery delivery services could increase.

The ratings agency encouraged insurers to embrace technologies like telematics and enhance their rate, underwriting and claims-settling practices.

Personal Risk

The government lockdown from the COVID-19 pandemic last March forced companies to embrace allowing office employees to work from home as the country focused on reducing the risk of transmitting the virus. For the most part, this trend continues, and many expect to see more employers offering work-from-home flexibility when life returns to normal.

According to the International Labour Organization, about 7.9% of workers — 260 million people — were home-based before the pandemic, but this figure has more than doubled worldwide since last year.

Though many risks go down when employees are out of the office, there are still significant exposures to consider for home-based workers. The ILO said homeworkers are not given the same level of social protection as people working outside the home and are less likely to be part of a trade union or covered by a collective bargaining agreement. They can face greater health and safety risks, depending on what their job entails, and less access to job training opportunities.

ILO economist Janine Berg told the Thomson Reuters Foundation that advances in technology and the COVID-19 pandemic would lead to a permanent increase in people working from home by using the internet, email and videoconferencing.

“It’s not necessarily a bad thing — some people really like it. But it’s about being aware of the potential risks,” she said. “The pandemic has added urgency to these issues.”

Still, NCCI predicted that the overall frequency of worker injuries will decline.

Safety concerns extend beyond injuries for those workers at home, however. As employees moved out of their secure office networks and into home-based offices, there was a flood of cyber-scams and hacking attempts related to the COVID-19 virus, a March Bloomberg story reported.

Nearly one in four respondents (22%) out of more than 1,200 business leaders surveyed in 2020 Travelers’ Cyber Risk Index said their firm was the victim of a cyber event — the highest percentage since the annual survey began in 2014. Travelers’ Index found that cyber threats are a top concern for large and medium-sized businesses, particularly as the ongoing COVID-19 pandemic forced many businesses to transition quickly to a remote working environment. The percentage of survey participants whose companies have at least 40% of their workforce being remote has more than doubled during the pandemic, from 26% to 59%.

“Employees working remotely are often on routers that are less secure than corporate networks, so when workers return to the office, they’re potentially exposing their companies to greater risk if a corporate device has been compromised,” said Tim Francis, vice president of Cyber Risk Management at Travelers Insurance.

Cybersecurity experts have emphasized the importance of ensuring employees have proper network security to protect their businesses from cyber vulnerabilities.

Topics Mergers & Acquisitions Trends Cyber COVID-19

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