The construction industry can expect continued supply chain disruptions and labour shortages. The rising cost of construction materials in Canada has significantly impacted the cost of repairs and subsequent claims associated with these costs. Combined with rising inflation, underwriters should be prepared for higher claim costs throughout 2023.
Class action activity has been growing steadily in Canada and particularly in British Columbia (B.C.) due to the introduction of no-fault auto insurance in May 2021, likely driving plaintiff counsel to seek new revenue streams. In the period between 2017 and 2021, the number of class actions in B.C. grew by 96% and in Ontario by 67%. Although there has been a slight dip in B.C. actions so far in 2022, the overall trend suggests an increase in class actions cases across Canada in 2023, with particular growth in the areas of cyber and privacy.
Unlike many jurisdictions, Canada has no modern slavery legislation. This could soon change for entities that produce, sell or distribute goods, import into Canada goods produced outside the country, or control entities that do so. The Fighting Against Forced Labour and Child Labour in Supply Chains Act could become law as early as January 2023, creating reporting obligations for Canadian-listed public companies that meet specific financial or employee thresholds, and potentially foreign businesses that do business in Canada. These businesses will be required to report steps taken to reduce the risk of forced labour and child labour being used in the supply chain. Failure to comply with the annual reporting obligations could result in fines up to $250,000, which may also apply to directors and officers, potentially increasing D&O risk.
Share Twitter EmailIn recent years we have seen how cyberattacks have become more sophisticated and the businesses affected have extended from financial institutions to governments, digital platforms, large retailers and energy companies. As a result, we are seeing an increase in the purchase of specific cyber-related insurance products. Latin American countries are starting to react to this trend with new laws to increase safety standards for public entities and critical infrastructure; protocols being established in large companies; and new criminal sanctions. Latin American countries will now start facing issues such as silent cyber, prohibitions on ransoms and the need for further regulation, all of which will require local markets to collaborate with the international insurance sector.
The winds of an imminent global recession are already affecting the way in which the different markets and sectors are defining their strategies for the future. Although each industry will react differently to their unique challenges, what is common to all areas is that it will be necessary to redefine the traditional ways of doing business and to adapt to a global market with high rates of inflation and devalued currencies. An additional effect of high inflation in LatAm is to reduce the appetite of consumers to buy new insurance. Although we have previously expected high growth margins in various countries in the region due to the low penetration rate, inflation and premium increases are creating additional obstacles. However, technology offers real opportunities in the search for efficiency. We therefore expect these pressures to lead to an increase in the development of the Insurtech industry in LatAm.
Share Twitter EmailA recent US$228mn judgment in an Illinois Biometric Information Privacy Act (BIPA) class action will embolden plaintiff firms to file more of these cases. BIPA has been a thorn in companies’ (and insurers’) sides for the past several years, resulting in a proliferation of US class action litigation. BIPA sets out disclosure and consent requirements for organisations that collect individuals’ highly sensitive biometric data. For instance, many employers require employees to clock in and out of work using a fingerprint instead of a manual punch card. Unfortunately, many companies fail to comply with BIPA’s relatively simply requirements due to lack of familiarity with the statute or mere oversight. This can result in devastating financial consequences for companies, as BIPA enables aggrieved individuals to recover the greater of actual damages or statutory damages ranging from US$1000 to US$5000 per violation.
The cost of construction defect claims will increase steeply in 2023. With labour shortages and supply chains disrupted, the current cost of work and materials is significantly higher than when original estimates were created. Therefore, owners’ demands on settlement and at trial have also increased suddenly and sharply. We can therefore expect significant reserve increases and payments that will outpace both historical settlement numbers and previous reserves.
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