This is part two of a three-part blog series in which we share the highlights of the insurance industry in 2019.
Waste & Recycling
In the Waste & Recycling industry, reverberations of China’s National Sword policy are still being felt worldwide. For the past 25 years, U.S. Materials Recycling Facilities (MRFs) counted on selling most of their plastics and recyclable waste to China for a healthy profit. Now, with China rejecting most recyclable material because of its new contamination standards, we looked at how American waste and recycling companies are having to renegotiate contracts with towns and municipalities. Until better solutions or new markets open up to accept the world’s trash, recycling haulers will need help to protect themselves from contracts that were put in place before China’s policy.
Waste & Recycling is the fifth most dangerous occupation in the U.S. While new technologies and public campaigns like Slow Down to Get Around are alleviating some of the dangers, new threats are emerging. In 2019, we looked at what happens when lithium-ion batteries are improperly disposed of in the trash. Lives and businesses are put at risk. This is an area we will continue to monitor.
Private Equity
The red-hot M&A market we saw in 2018 continued into 2019, with EBITDA multiples at peak levels. With such high valuations of companies being bought and sold, the stakes for private equity firms have never been higher. When you take on a company, you also take on their exposure, so we outlined the three questions you should ask your insurance broker before completing a merger or acquisition.
Recognizing that private equity firms are facing growing competition from cash-rich strategic investors outside of the U.S., we also addressed some of the specific challenges and risks foreign buyers need to navigate during M&As, including an active legal environment and the reality of how different cultures communicate differently.
Cyber Liability
With every year comes more pernicious threats to our computer and IoT systems. Cyber criminals are finding more surfaces to attack and are crafting more malicious malware than ever before. Cybercrime is a threat to every industry. Our cyber liability experts spelled out some of the biggest threats today and looked at how data privacy laws are impacting cyber insurance in the future.
IoT devices —from Nest thermostats to networked sensors on utility grids — are doors hackers can use to enter both private networks and public infrastructure. While we haven’t seen a massive IoT attack on utility grids or smart cities yet, it’s coming, and it could cause death and property loss far beyond the limits set in most policies. Cyber insurances policies written a few years ago many not have adequate language to cover damages that today’s IoT vulnerabilities expose.
If 2018 was the year of GDPR, 2019 was the year of CCPA. The California Consumer Privacy Act, which goes into effect on Jan. 1, 2020, is the strictest data privacy law passed in the U.S. to date. With a damage provision set at $100 minimum per individual breach, we anticipate a significant uptick in class action lawsuits following data breaches, even for relatively small ones. And with more litigation costs and more claims, we predict higher cyber premiums in the future, especially as the trend of data privacy protections continues to expand domestically and globally.
Another reason we’ll see changes in limits and pricing of cyber insurance is a surge in ransomware attacks in 2019. At some level, all organizations are dependent on data to service their customers or constituents. The single biggest threat in cyber liability today is ransomware, in which cyber criminals gain access to a computer system, encrypt the data and demand a ransom to restore it. More and more victims – from businesses to government entities – are paying the ransoms. In fact, in 2019, for the first time ever, the growth of ransomware insurance claims outpaced the growth of new customers of cyber insurance.
Environmental
Climate change continues to dominate the news and throw existing actuarial models into unchartered territory. At the same time that hurricanes, flooding, winter storms and wildfires are growing more frequent, intense and widespread, the Trump Administration is rolling back environmental regulations, which can lull commercial property owners into a false sense of security when it comes to buying environmental insurance.
In 2018, the EPA inspected fewer industrial facilities than any other year in the last decade, and it collected significantly less in fines. In the blog, “Don’t Let a Lenient EPA Increase Your Risk,” we warned against the temptation to become complacent with your environmental compliance and risk management strategy. Political tides always change.
PFAS, the toxic group of chemicals known as the “forever chemical” used to make non-stick cookware, firefighting foams and food packaging, made major headlines this the year as awareness around the adverse health effects were publicized. The issue caught Hollywood’s attention with the film “Dark Waters,” released in November. PFAS is on our radar for the potential exposure it presents for builders, lenders and M&As involving property transactions due to the long-tail nature of environmental contamination and the remediation it can trigger.
Fine Art
Why should fine art collectors, dealers, museums and artist-endowed foundations be watching what’s happening across the Pond in Parliament? Because if you plan on lending, shipping or consigning artwork anywhere in the U.K. after Brexit goes into effect, you could encounter logistical nightmares. Priceless works of art could get held up in non-temperature-regulated customs warehouses. We took a look at the uncertainty in the art world that Brexit could pose and gave tips on how to handle art shipments during the Brexit transition period.
Want to learn about the threats, trends and policies that we discussed in 2019? Part three of our 2019 Wrap-Up Blog includes insights in the areas of Architects & Engineers, Entertainment & Media, Claims Management, Professional Liability and Private Client.