Labour's plan to encourage millions of homes to be fitted with solar panels (the so-called rooftop revolution) and create more solar farms will lead to more claims. Technology is developing at pace; initial installation costs are high; not all roofs are suitable; safety and fire risks are high; and the skilled workforce is unlikely to be able to meet anticipated output. While the industry gets to grips with all of this, we predict greater risks for insurers that all stakeholders will need to consider. Construction all risks underwriters need to consider their exposure carefully and ensure wordings and premium accurately reflect the risks involved.

Having experienced another year of heavy rainfall and both local and regional flooding, we predict a rise in flooding claims next year. As insurers are continually facing more frequent and larger claims, they may be more likely to consider recovery opportunities against, in particular, local authorities and other relevant government agencies who either failed to implement appropriate flood defences or failed to properly manage the flood defences in place. This could include a failure to maintain overflow areas or decisions to raise/lower defences at the right time. Historically such recovery claims have been difficult to maintain, but the tide may slowly be turning after some more favourable recent decisions and we have already seen an uptick in enquiries from insurers to work with insureds and loss adjusters to ascertain the merits of potential recovery actions.

Climate change could develop a direct and more obvious correlation with political violence. The effects of climate change are well known – drought, famine and mass migration. Each of these may have a significant impact on the already heightened world tensions and predicted increase in political violence. Already unstable governments may struggle with the increasing needs of their populations in response to a heating planet and changing international views on the subject of foreign aid. The political violence and terrorism market will need to be wary in the coming 12 months when it comes to risks located in areas bearing the brunt of climate change

Russia's continued operations in Ukraine, new global alliances, the South China Sea tensions, not to mention the complex and multi-faceted issues in the Middle East, mean the potential for global political developments to impact business operations continues to grow. Political risk insurance has long been at the forefront of assessing developing global trends and offering solutions, be that cover for confiscation, expropriation, nationalisation or deprivation by or under the order of a foreign government (CEND), contract frustration cover or unfair calling of bonds (to name but a few). All of these products become increasingly attractive and important in a progressively unstable global environment. We predict growing demand in 2025.

Threat actors will continue to breach defences and cause loss, with the human factor remaining the weakest part of organisations' security systems. The continued search for the best balance between system security and usability will allow for continued penetration of systems. New challenges such as AI-related scams will create further risk. Although tools such as multi-factor authentication make third-party access harder, with cloud-based systems and resilient back-ups aiding recovery, none represent a panacea. In the future, we anticipate that data will simply be stolen, compared to current trends where data is often encrypted and ransomed against publication. For consumers affected by these incidents, while bank redress schemes may offer some form of remedy, they may encourage threat actors to see data theft as a victimless crime. For businesses, however, there will be no such redress.

The construction sector is currently susceptible to insolvency. This is due to an almost perfect storm of issues such as debts accrued over the years, repayments of COVID-19 loans, changes in taxation rules, inflationary pressures, increased labour costs, lack of working capital, falling cash flows and 'suicide bidding' to win work. We may also, once again, see an increase in speculative claims being 'shoe-horned' into professional liability policies and greater use of the Third Parties (Rights Against Insurers) Act 2010. That said, we will need to wait and see how the government will react, especially with its intention to meet huge new housing targets, the continued de-carbonisation of the energy sector and its plans around infrastructure. Whether the government will re-introduce a form of Private Finance Initiatives to achieve these aims remains to be seen – but this perfect storm will not be solved without real intervention.

Representing one of the most significant global technology outages since NotPetya in 2017, the CrowdStrike incident will act as a poster child to prompt policyholders and insurers to review their policy wordings and coverage where a systemic or supply chain cyber incident has the potential to cause a massive financial impact. While coverage for non-malicious cyber events, including 'system failure' cover, is not always available or purchased by policyholders, the CrowdStrike incident highlights its importance and acts as a useful case study to review appropriate interruption periods, waiting periods and retentions for non-physical damage BI cover, if purchased. Looking forward, there is also a need for discussion as to where the line is drawn between a policyholder's software and systems, and a managed services provider. Policyholder reliance on systemically important and vulnerable systems continues to increase, challenging insurers to determine appropriate coverage limits and/or value appropriate premium.

We expect to see continued growth in 'exaggerated loss' frauds, across both injury and damage claims. This expansion goes hand in hand with the layering of claim related costs. There remains a small, but significant, cohort of claims companies and associated enablers who are deploying a business model concerned only with maximising cost generation, regardless of legitimacy or claimant need. Furthermore, insurance application fraud is growing significantly, explained in part by the ever increasing ease of access to software used in the creation of shallow-faked documentation, which can be created using basic photo editing platforms such as Photoshop.

As the ESG focus swings from environmental and governance issues towards social concerns, and in particular diversity and inclusion, the spotlight will intensify on neurodiversity in the year ahead. This is not just as a matter of social responsibility but as a key opportunity to access fresh ideas and untapped talent for the industry. The Buckland Review of Autism Employment published its report in February 2024, highlighting that 1 in 70 people are autistic and that autistic people face the largest pay gap of all disability groups. There is a wide range of potential barriers to work for autistic people; poor preparation by employers, unfair hiring practices, unclear processes and outdated attitudes all play a role. No wonder only around 35% of autistic employees are fully open about being autistic, with 1 in 10 not disclosing to anyone at work. The report provides recommendations on: initiatives to raise awareness, reduce stigma and capitalise on productivity; supporting autistic people to begin or return to a career; and appropriate recruitment practices and career progression. In order to reap the benefits, a supportive and inclusive environment will need to be provided but tapping into this talent pool is clearly something insurers should continue to work on into 2025 and beyond.

The problem of underinsurance and the application of average is worsening and professional negligence claims against insurance brokers (for the shortfall in claims payments) are expected to increase. Indeed, a recent survey found that a staggering 46% of commercial properties were likely to be underinsured, with the average shortfall in cover being 40%. There has been significant inflation in rebuild and repair costs (labour and materials) and delays are extending periods of business interruption. Claim payments are being reduced, often significantly, due to such underinsurance. A broker is not a surveyor or valuer, but is under a duty to advise clients on the need to keep the adequacy of building sums insured under regular review, as well as warning of the potential consequences of average being applied where there is underinsurance. Further, the broker must advise on an appropriate length of business interruption insurance for a client's business. Without such clear advice, clients facing shortfalls in claim payments are likely to look to their insurance brokers for compensation.

"There will be ongoing discussions on understanding the implications of Martyn's Law." So says the Impact Assessment accompanying the Terrorism (Protection of Premises) Bill which was introduced into Parliament on 12 September 2024. This development may have caught some unawares, despite the efforts of Figen Murray, the mother of Martyn Hett (after whom the Bill is named), to keep the proposed legislation in the limelight. While the Bill's main impacts are likely to be on liability, including public liability and D&O, insurers, brokers and insureds will need to consider the detail of the Bill and its impact on coverage and exclusions in existing property and terrorism policies as well. These could be positive (for example, a reduction in premiums where it is recognised that premises represent a better rated risk as a consequence of having public protection procedures in place) or negative (for example, where there have been identified failings). Certainly, where available for enhanced duty premises and events, underwriters should be obtaining the information prepared for the Security Industry Authority as part of the presentation of the risk. Additionally, the greater awareness of the threat of terrorism could result in more property owners applying for terrorism-related insurance policies.

The omission of the Litigation Funding Agreements (Enforceability) Bill in the King's Speech in July 2024 was surprising. The Bill would have reversed the Supreme Court's decision in the PACCAR judicial review and clarified the enforceability of litigation funding agreements (LFAs) by amending s58AA of the Courts and Legal Services Act 1990 and confirming LFAs are not damages-based agreements. The government is set to conclude its general review of the litigation funding sector, including the need for greater regulation and safeguards to protect claimants, by Summer 2025. Uncertainty over the enforceability of LFAs is therefore now set to continue for at least another year. Such a long wait is disappointing for the litigation funding industry and restricts the vital funding options available to individuals and small businesses, potentially preventing them from accessing justice and pursuing claims against better resourced corporations.

Digital threats are becoming increasingly common, more sophisticated and more impactful as society's digital transformation continues and there is an ever-increasing dependence on digital technology. As a result, cyber security laws will increase both in number and extent. At a UK level, we have already seen the Cyber Security and Resilience Bill introduced in the Labour government's first King's Speech. The Bill aims to "strengthen the UK’s cyber defences [and] ensure that critical infrastructure and the digital services that companies rely on are secure" and will expand existing regulations to cover "more digital services and supply chains". In parallel, in September 2024, the UK government classified UK data centres as ‘Critical National Infrastructure’, a step designed to improve the security and resilience of these engines of the modern economy. Similarly, in the EU, the requirements of the revised Network and Information Systems Directive (NIS2) had to be implemented by EU members states by 17 October 2024, replacing the outdated laws implementing NIS1.

The need for product liability reform in the UK is becoming critical. As EU reforms deal with product safety and liability, it highlights the risk of UK legislation becoming inadequate to deal with technological developments. The UK Product Regulation and Metrology Bill, if passed, will represent a significant update to the product safety framework in the UK. However, the draft Bill does not address amending the current product liability regime under the Consumer Protection Act. The 2023 consultation preceding the draft Bill paid lip service to the question of updating the UK's product liability framework when compared to the updated EU Product Liability Directive, which widens liability to include software and digital processes. The need to update UK legislation to reflect technological advances such as products with non-physical elements is a pressing issue. The current absence of specific regulation in the UK for AI generally also creates a legislative gap within product liability, to be addressed sooner rather than later. Again, the lack of clarity invites unfavourable comparison with the European Union where the renewed Product Liability Directive will amend the definition of 'product' to include software, which includes AI systems. We expect steps will be taken this year, which could take a number of forms, such as a consultation with draft legislation further down the line.

In light of decisions addressing the application of various policy wordings to the COVID-19 pandemic, insurers may look to rework policy wordings. Decisions such as the recent Court of Appeal judgment in the London International Exhibition Centre case have thrown a renewed focus on the impact that uninsured perils operating in the wider area around a policyholder's premises can have. While the old Orient Express principle that the policyholder cannot claim for losses which would otherwise have been insured, but for the occurrence of wider area damage, has been consigned to judicial history for three years now, the London International Exhibition Centre case has highlighted the most extreme ramifications of this. Notably, insurers have become liable under clauses which require the peril (in that case, occurrence of disease) to occur at the policyholder's premises, for losses which were essentially brought about by government restrictions imposed at a national level in response to disease across the country. Underwriters may well wish to consider altering their wordings to limit the risk of business interruption coverage being triggered in circumstances not intended to be covered.

The first bellwether trial against social media companies for addictive product design and other allegations will potentially upend traditional principles on product liability, design of digital products and corporate responsibility. The trial is part of US multi-district litigation brought on behalf of children and scheduled to take place in late 2025. The action alleges intentional creation of products with addictive engagement, driving compulsive use and algorithmic manipulation, resulting in various physical and emotional harms, including death. European regulators, rather than litigators, are challenging social media platforms with the European Commission opening formal proceedings under the Digital Services Act. While we do not expect civil claims to necessarily follow in Europe, the impact of the Representative Actions Directive may alter perceptions on pursuing these types of claims.

The growing number of nuclear verdicts will prompt further lobbying by defendant organisations to progress tort reform in the US at state and federal levels. Civil juries continue to award multi-million and billion-dollar verdicts, arguably aimed at punishing defendants rather than compensating claimants. These awards are often significantly reduced on appeal, creating uncertainty for defendants, their insurers and plaintiffs. One such instance saw a reduction in a glyphosate-related cancer claim from $2.25 billion to $400 million. Any efforts to reduce awards for punitive damages may prompt reconsideration of other tortious concepts including moral damages. Although punitive damages in civil cases are largely limited to the US, there has been a move towards awarding increased moral damages to reflect serious cases of negligence and the protection of human rights in Latin America, particularly Mexico. In the event of tort reform limiting punitive damage awards, US plaintiff representatives may look to develop a similar concept of moral damages in order to maximise compensation for their clients.

In last year's predictions, we mentioned the developing impact of AI in the legal sector and the opportunities and risks that come with it. One year on, this remains highly topical, reflected in an updated Law Society Guidance Note issued in August 2024, and a Law Society Gazette roundtable report in September 2024. The Law Society is calling for a 'balanced' approach to reflect that there are both risks and opportunities, in response to the UK Government's pro-innovation approach. The momentum is increasing and fears have been expressed about a two tier landscape, with smaller firms being unable to offer the tech-savvy solutions demanded by increasingly sophisticated clients. Technological advances are nothing new, but the use and misuse of AI will be a recurring theme for the profession over the next 5-10 years.

Before any legislation for the proposed Hillsborough Law is introduced, there will be fundamental questions to be addressed, particularly over the implications of the planned duty of candour on the right to silence and the right against self-incrimination. Following the King's Speech and the Labour Party conference, Sir Kier Starmer promised that the Hillsborough Law will be introduced in Parliament before April 2025 to establish a legal duty of candour for public authorities in the aftermath of major public tragedies. Back in 2017 when the original Public Authority (Accountability) Bill was introduced by Andy Burnham MP, its aim was to "protect other families from going through what the Hillsborough families went through and from a similar miscarriage of justice." The Bill fell due to the general election in 2017 and there is currently no draft legislation before Parliament. It is anticipated that any future wording will closely align with that of the 2017 Bill.

On 26 October 2024, a new positive duty on employers to take "reasonable steps" to prevent sexual harassment in the workplace came into force. Employers must now proactively implement measures to embed a respectful work culture through zero-tolerance policies, staff training on inappropriate conduct, and effective and sensitive complaints handling procedures. Neglecting to prepare for this new duty could lead to an increase in harassment claims and more compensation. If an employee succeeds with a claim for sexual harassment and the employer has breached the new duty, the tribunal can increase compensation by up to 25%. The Equality and Human Rights Commission (EHRC) can also investigate and take enforcement action. Action can be taken based on a suspicion of non-compliance; there does not need to be an incident of sexual harassment before the EHRC will consider exercising its enforcement powers.

The new UK Labour government has signalled that it could be receptive to establishing a UK-domiciled captive regime. The London Market Group (LMG), with the backing of brokers, captive managers, insurers and AIRMIC, is calling for a consultation over the coming months to advance a framework to establish London as a leading captive centre, attracting international business and promoting growth. London's existing expertise in insurance creates a trusted and stable environment for new captive formations by UK companies and non-UK multinationals, as well as a skilled workforce, provided that the fiscal and regulatory conditions are favourable and competitive. France has seen significant growth in its captive market in recent years and the UK will need to act swiftly if it wants to avoid being left behind.

AI capabilities have developed exponentially in the past two years. In particular, advances in generative AI have resulted in this technology leaping to the top of board room opportunity and risk agenda and into the minds of the general public. However, it appears that the roll out of AI systems across organisations has slowed, in part due to complex privacy considerations. As data protection regulators continue to intervene, this trend will continue. As the privacy challenges arising from the use of AI systems crystalise and the regulatory focus increases, the Data Protection Impact Assessment will emerge as a crucial data protection tool.

Fraud offences in the UK are changing. The Economic Crime and Corporate Transparency Act 2023 (ECCTA) creates a new "failure to prevent fraud" offence, committed when an employee of a large organisation perpetrates a fraud and the organisation has failed to implement reasonable fraud prevention measures. ECCTA also reforms the identification principle, making it easier to attribute criminal liability to corporations for economic crimes committed by a 'senior manager' acting within the actual or apparent scope of their authority. This represents a substantial widening of potential liability, as the definition of senior manager is broader than the board of directors and may include any individual with substantial management authority. ECCTA brings a greater risk of corporate and D&O prosecutions, and therefore organisations must implement robust fraud prevention procedures and safeguards to oversee the conduct of their senior managers. The consequences of non-compliance will otherwise be severe. 

The positive decision for insurers in MOK Petro Energy will see section 11 of the Insurance Act 2015 being given a broad interpretation, it not being necessary in that case to establish a direct causal link between the breach of a policy term and the loss, for cover to be limited. Section 11 requires the breach of a policy term to be relevant to the actual loss if it is relied on to limit cover. MOK breached a warranty requiring a surveyor to inspect and certify shore lines connecting to its vessel. Although inspection occurred, certification did not. Insurers sought to rely on this breach to refuse the claim. MOK argued that the failure to certify was immaterial to the loss. It was decided (obiter) that it was necessary to look at the warranty as a whole. Non-compliance could have increased the risk of loss that actually occurred (water contamination). This provided grounds for insurers successfully to refuse MOK's claim.

The 'anti-greenwashing' rules recently announced by the Financial Conduct Authority (FCA), aimed at ensuring that managers of UK based investment funds are correctly labelling their investment products, are a further example of the FCA's hardening approach to companies that make misleading statements to their customers. With a greater focus on climate and wider environmental, social and governance issues, corporate disclosures and statements are being closely scrutinised for accuracy and they are providing fertile ground for shareholder litigation in England and Wales. Claims are typically pursued under s90 and s90A of the Financial Services and Markets Act 2000, which provide a path to redress for shareholders of listed companies if they have allegedly suffered loss due to untrue or misleading statements. Activists are increasingly buying stakes in companies in order to use their shareholding to hold officeholders to account and challenge corporate behaviour. The increase in regulation, alongside an increasingly active investor population, will continue the growth of shareholder litigation.

While activist litigation has been high profile across several jurisdictions in 2024, 'polluter pays' litigation based on contribution to harm caused by climate change will continue to progress. In the US, a series of claims have been issued by states and municipalities against fossil fuel companies, including in City & County of Honolulu v Sunoco LP, based on the defendant's allegedly deceptive marketing and its failure to warn of the climate change impacts of its products. A petition filed by the defendant arguing that the claim should be dealt with federally is outstanding in the US Supreme Court and, in June 2024, the Supreme Court invited the Solicitor General to file a brief expressing the views of the US. Other actions do not seek damages, but rather funds for remediation. Outside the US, we continue to watch similar cases brought by individuals (often from the Global South), such as Lliuya v RWE, which has now reached the evidentiary stage. This stage itself has the potential to effect substantial change and momentum as further information comes to light. If successful, these claims will result in significant damages awards against carbon majors and precedent for yet further classes of action.

While the output from renewable energy is green, the same is not true for every aspect of the process. The mining and extraction of rare earth materials required may generate significant carbon emissions and create various additional risks. Litigation or allegations relating to breaches of sustainability regulations could generate financial losses for companies. These losses may not only be direct, but also as a consequence of reputational harm. Those financial losses could generate claims from shareholders who have been adversely affected, leading to claims under directors and officers policies. Mining and extraction may also involve dangerous working conditions and raise questions around the human rights of inhabitants of these locations. Litigation relating to the placement of renewable energy infrastructure is also likely to increase. There is also a disconnect between the ambition of the circular economy and recycling of equipment that is now reaching end-of-life. Looking forward, managing expectations around renewables should form part for the ambit of risk manager, broker and insurer discussions.

PFAS litigation citing environmental contamination and product-related exposures is predicted to rise as states and municipalities in the US enforce regulations and pursue actions regarding contaminated water. However, the prominent multi-district litigation in South Carolina leading the pack has narrowed, both in terms of active defendants (following recent substantial settlements) and scope (focusing on certain classes of alleged bodily injury). Nevertheless, new plaintiff groups will continue to emerge and new defendants will likely also enter the litigation arena as the scientific research and regulatory scrutiny intensifies.

The Automated Vehicles Act 2024 passed into law in May. Full implementation, though, will require passing numerous regulations relating to operator licensing, marketing restrictions, information gathering, investigatory and monitoring powers, policing and adjustments to existing vehicle legislation. Many of these regulations will require consultations, starting with one on the foundational safety principles. Expect the publication of the statement of safety principles consultation in early 2025, with other consultations on regulations relating to authorisation, operator licensing and marketing restrictions to follow. Given the importance of insurers having a voice in how the UK's motor fleet and road network adapt to these new technologies, insurers should be prepared to offer detailed and considered responses to the consultations.

The UK's regulatory framework for VTOLs (vertical take-off and landing aircraft) is promisingly taking shape. In September 2024, the Civil Aviation Authority (CAA) announced the establishment of two key working groups and it is now focused on introducing regulations that are in step with other regulators (principally the US and EU) but appropriate for the UK environment. In January 2024, the CAA consulted on (i) the handling rules for VTOL aircraft using battery power for propulsion and (ii) design proposals for vertiports at existing aerodromes. All this bodes well for the UK's ambitions to lead the way in this important sector of the aviation industry, while maintaining its usual high regulatory standards. As outlined in the UK's Future of Flight action plan (a Government-Industry Statement of Intent, published in March 2024), piloted eVTOL flights in the UK are identified as a key aim in 2026 "as a first step to scaled operations and a sustainable industry". The plan envisages a partnership between government, the CAA and industry to forge operational capabilities, physical infrastructure and the nurturing of associated manufacturing and technological development. As we look to the next 12 months, the UK's position of prominence in the VTOL space looks assured.