Welcome to iLeads Insurance Market Minute, where we bring you the latest, most relevant news regarding the insurance market. Last week you were reading Everyone’s Getting Burned in D&O Insurance. This week we’re bringing you:
Demand for social engineering fraud coverage on the rise*
A rise in crime committed via social engineering is prompting a growing number of businesses to add coverage for related exposures through their commercial crime insurance policies, experts say.
The COVID-19 pandemic has led to an increase in cyber-related crime as fraudsters use social engineering techniques to exploit systems and procedures made more vulnerable by remote working, they say.
While figures for 2020 are not yet available, some 23,775 business email compromise complaints resulted in $1.7 billion in losses in 2019, according to the FBI’s Internet Crime Complaint Center.
Business email compromises are a form of social engineering fraud whereby attackers impersonate a CEO or executive authorized to conduct wire transfers and induce employees to transfer money to a fake client account.
The FBI on Jan. 14 warned of an increase in “vishing” or voice phishing attacks targeting employees working remotely in the pandemic and of the heightened risks companies face when network access and broadening of online privileges may not be fully monitored.
Carve-outs factor into two-thirds of $1B-plus deals in 2020*
Insurers are using divestitures to help them re-focus on core operations, according to a report Tuesday from consultancy Bain & Co.
These targeted disposals, or “carve-outs,” have accounted for 70% of insurance mergers and acquisitions over the past five years, Bain said.
“The year 2020 continued a multiyear trend in which global insurers are streamlining their businesses by simplifying operations and redefining themselves with a narrower scope and stronger core,” Bain said.
In 2020, 67% of deals greater than $1 billion were of the “carve-out” variety, with 33% stand-alone transactions, Bain data showed.
Axa SA, for example, following the 2018 purchase of XL Catlin Ltd., completed the sale of its Poland, Czech Republic and Slovakia businesses to Uniqa Insurance Group AG in October 2020, Bain said.
Other acquisitions allowed buyers to build and strengthen core businesses, as with Aon PLC’s $30 billion acquisition of Willis Towers Watson PLC, Bain said.
Private equity buyers have shown continued interest in insurance acquisitions, Bain said. “There seems to be no end to private equity’s appetite for insurance companies,” with private equity accounting for 14% of deal volume in 2020.
Elsewhere, the number of private technology investments by insurers fell to 96 in 2020 from 132 in 2019, data showed even as the total number of investment deals grew to 377 from 314 in 2019.
COVID-19 vaccine administers a big dose of risk to the insurance industry*
It’s been one year since the World Health Organization (WHO) announced that the disease caused by the novel coronavirus would be named COVID-19, and now, many countries have started to distribute vaccines for the virus to their populations. As of February 10, 128 million vaccine doses had been administered, according to WHO, with many more doses to go.
The insurance industry isn’t just standing by on the sidelines during this process. In fact, insurers have a stake in how the global vaccination process unfolds. For one, companies have taken part in the vaccine trials in several ways, like Lloyd’s of London partnering with a supply chain data platform and cargo insurer to help distribute vaccines around the world.
More notably, insurers will need to introduce and evolve key coverages related to COVID-19 vaccines, keeping in mind the risks associated with their global distribution. Lloyd’s, for instance, now offers cover for the delivery of any future vaccine, which has enabled the safe transportation of it to low-income countries, while Aviva Singapore announced in January that its health insurance products will automatically cover side effects arising from the COVID-19 vaccination, at no additional premium.
Life and health insurers have been especially involved with the vaccine, from South African medical insurers stating that they will pay for a vaccine for as many people who don’t have coverage as they have members, to China reportedly looking to introduce a compensation system for people that suffer adverse events linked to vaccinations. Nonetheless, some insurers, like those in Malaysia, are still on the fence about providing coverage for the possible side effects of the vaccinations.
Vaccines could also have reverberations for other coverages outside of L&H insurance. Willis Towers Watson has reported that employers in the US should prepare for the potential risks that could arise once the vaccine is distributed to the general public, primarily on the employment practices liability front. How companies follow the updated Equal Employment Opportunity Commission guidelines on vaccine requirements in the workplace, and how their employees respond, could lead to employment practices liability claims, WTW cautioned.
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