welcome to informed insurance


Europe predictions
#1 France

France: Will we see the end of coal power plants?

Again the world is united to fight against climate change. France, who led COP21 in 2015 to the landmark Paris Agreement, now calls on China and Russia to play its part. Will the world get a last chance? It is obvious we need bold action as soon as possible. We need to see the end of coal power plants as soon as possible. When will that happen? Of the planned shutdowns of the four French coal power plants, only two have been completed. The third was reopened in October 2022 in order to weather the energy crisis, while the fourth is being extended until at least 2024 (if not 2026).

#2 Germany

Germany: The No.1 cyber threat will remain ransomware

Press releases, statistics from authorities and day to day claims practice show the foremost cyber threat is still ransomware. Even though many companies are now in a much better position than they were a few years ago, it is difficult, especially for small and medium-sized enterprises, to maintain the corresponding organisational and human resources. For the insurance industry the situation will remain challenging. Most of these cases result in high costs. At the same time, a binding and uniform IT security standard is lacking in most countries. However, a lot has happened in Germany recently. It will be interesting to see whether these standards also become established in insurance contracts, as has long been the case with comparable technical requirements in property and product liability insurance.


Germany: ECJ decision on damages under the GDPR will be critical

One of the most important provisions of the General Data Protection Regulation (GDPR) is Art. 82 on damages for infringement. In the form of non-material damage, the GDPR has introduced a new concept for many EU states. However, many important questions remain unresolved. A recent Opinion of the EU Advocate General provides hope that some of these questions will soon be answered by the ECJ. The decision will be very important for cyber insurers. Data risk and data breach cover in cyber insurance is a sleeping giant. It is not uncommon for claimants to use a claim under Art. 82 as a threat. Against this background, the Advocate General rejected the use of Art. 82 GDPR as a claim for punitive damages. Furthermore, he was of the opinion that Art. 82 does not contain a presumption of damage in favour of the claimant. However, he did not find a de minimis limit. It will be interesting to see if the ECJ will share this view, because it can be a major challenge when companies and their insurers are faced with cases involving a large number of very small claims. The ECJ’s decision on such a central issue will be critical and should be closely monitored.


Germany: Legislation expected on class actions

In the wake of ‘Dieselgate’, premium adjustment litigation against German health insurers, litigation against life insurers regarding the extent of rescission possibilities and data breach litigation, German courts have learned the hard way that consumer-oriented law firms have developed the technical means to collect thousands of similar claims and litigate them all one by one in individual proceedings. Since German procedural law has not yet recognised the means to handle mass litigation, lawmakers are trying to relieve the courts of the massive number of individual proceedings by transposing the EU Directive on Representative Actions for the Protection of the Collective Interests of Consumers into German law. Product liability insurers will most likely have to cover these kinds of proceedings while facing considerable risks, as the new law could introduce US discovery-style duties which is an entirely different approach to the current regime.


Germany: Supply chain interruption may create fresh product liability risks

It is industry standard that partners in supply chains are bound by framework, quality and service level agreements. Following COVID-19 and the war in Ukraine, long-established supply chains have been disrupted, leaving parties to find quick solutions. Even the slightest changes in construction, material or production may lead to unforeseen issues, with a risk suppliers will face product liability claims and even recalls. Insurers will certainly need to assess relevant exclusions.


Germany: Will PFAS be the new asbestos?

The ball has been rolling in the US for years and it is just a matter of time before it will start rolling in (and over?) European companies. This is especially the case for countries with a strong industrial economy, such as Germany, and where new mass litigation instruments are on the horizon. Since the insurance market for industrial liability risks has hardened during 2022, it will be interesting to see whether product liability insurers will be able to negotiate proper PFAS (perfluoroalkyl and polyfluoroalkyl substances, so-called ‘forever’ chemicals) risk exclusions. While PFAS might be the worst risk, others such as Glyphosate (with EU approval running out in December 2022) are gathering momentum.


Germany: German M&A and W&I market will thrive despite or even because of challenging economic conditions

While current market uncertainties will continue to be present in 2023, we expect continued robust M&A activity in Germany. New drivers for this, besides growing investment pressure, are securing supply chains, reducing dependencies and improving the internal ESG balance. At the same time, the risk of breaches of warranty, and so the importance of M&A insurance, is likely to grow. In particular, geopolitical uncertainty increases the risk of misrepresentations in financial statements, driving demand for W&I policies. An expected increase in distressed transactions should also have an effect on the number of W&I policies, especially as the tendency to expand enhancements is expected to continue, along with rising premiums.


Germany: German Supply Chain Act will force companies to implement new risk management

While the details for a European Supply Chain Directive are still discussed, a German Supply Chain Act came into effect on 1 January 2023. At first it will be applicable to companies with more than 3,000 employees in Germany, but from 2024 onwards that figure will drop to 1,000 employees. It aims to protect basic human and environmental rights and establishes new duties with regard to supply chains, including direct and indirect suppliers. In particular, companies will have to conduct a risk analysis in order to identify relevant risks as well as risk management to prevent and remedy violation of protected human and environmental rights. Many provisions remain vague, but companies that do not fulfil their obligations can be severely fined (up to 2% of annual revenue) and excluded from public contracts. In such cases, claims against directors will come into focus.


Germany: Insolvencies will continue to be a significant driver for D&O claims

Winter will bring a wave of insolvencies and, with some delay, claims raised by insolvency administrators against directors with regard to the reduction of insolvency assets. While substantial state aid made sure fewer companies than expected had to file for insolvency due to the effect of COVID-19, the financial reserves of many companies have melted away. The massive increase in energy costs and inflation are now hitting many companies with full force, in particular manufacturing companies from the automotive and chemical sector. The government temporarily amended the conditions triggering the need to file for insolvency where businesses are over-indebted, but this will not be sufficient where they also become illiquid, which is far more relevant in practice.


Germany: ESG claims will threaten product liability and recall insurers

While some may assume ESG is just a D&O risk, ‘Dieselgate’ has shown that violations of environmental law may need to be re-thought from a liability perspective. German liability law has been reluctant to recognise claimants’ subjective rights in environmental claims. But that could be re-thought in the coming years, after systematic violations of environmental law in the ‘Dieselgate’ litigation were a vehicle owner to argue in favour of warranty claims, granting individuals litigable rights. Just like the upcoming mechanisms of mass litigation, the re-framing of traditional legal views is hands-down the biggest threat to product liability and recall insurers in the years ahead.


Germany: Recall claims are not warranty claims – are they?

It is not seriously discussed under German law that ‘free of charge’ measures in the case of a defective product are subject to warranty claims. In the case of a recall the focus of any remedial measures lies in mitigating risks to life and limb, rather than the future usability of the product. But that does not seem to be the understanding of EU lawmakers as Art. 35 of the amended Regulation on general product safety proves. The ‘right to remedy’ pursuant to that clause contains a duty to offer consumers an “effective, cost-free and timely remedy”, consisting of repair, replacement or even refund of the value of the recalled product. There is no need at all to conflate the traditional, well-balanced system of warranty claims with tort-based recall duties – EU lawmakers should erase that draft stipulation now.

#3 Ireland

Ireland: Legislation will allow third party litigation funding

The Supreme Court confirmed in 2017 that third party litigation funding by an entity with no independent interest in the underlying proceedings is prohibited under Irish law. However, the Irish government has now indicated that legislation will be put in place to permit third party funding of international commercial arbitration. While it will take some time to feel the effects of the legislation in practice, many see this as further developing Ireland’s reputation and competitive edge in arbitration. It will be interesting to see how the legislation plays out in practice in 2023 and what impact, if any, will be felt by insurers.


Ireland: Litigation related to personal injuries guidelines will increase

As the impact of the Judicial Council Guidelines begins to take hold, we expect a marked increase in the number of personal injury cases being run to trial by insurers in Ireland, seeking clarity and certainty as to the interpretation of the guidelines by the courts. Following on from this, we can expect an increase in the number of appeals challenging rulings on damages, both in the High Court and Court of Appeal, as disputes over matters related to quantum are litigated robustly between plaintiffs and defendants alike.

#4 Spain

Spain: Reform of Insolvency Law may increase risk for D&O insurers

Changes to the Spanish Insolvency Law which came into force in September 2022 may leave D&O insurers at greater risk. The reform allows certain creditors to submit a classification report within the insolvency proceedings. It is now possible for not only public bodies (such as the insolvency administrator and the Public Prosecutor’s Office) but also parties with their own interests, such as certain creditors, to take part in the insolvency classification. This leads us to think that there could be an increase in the number of insolvency proceedings in which a finding of negligence is requested against the former directors of the insolvent company, resulting in more judgments which classify the insolvency as involving negligence on the part of the former directors. The new law also specifically permits and regulates settlement agreements between directors and creditors within the framework of the classifications section of the insolvency proceedings. These agreements could cover the settlement of outstanding debts owed personally by the directors and officers, once the insolvency proceedings for the company have been concluded. These agreements, combined with the more active participation of certain creditors in the classification section, means that the formalisation of these types of settlement agreement could become a common scenario in this insolvency phase. It seems reasonable to think that, for all these reasons, D&O insurers could start to be asked frequently to cover these agreements.

Back to top