How to respond Surety

The details Surety

Be selective. With abundant backlog, contractors should be more discerning when choosing projects to bid on, to help ensure a healthy level of profit. Emerging technology. Increased application of emerging construction technology and automated or pre-fab building methodologies can help offset the acute labor shortage. Collaborative construction. Collaboration between public project owners and contractors could help mitigate unexpected price movement and supply uncertainties.

How to respond Surety

Increased bid prices

Tight labor market

Funding versus inflation

Sustained inflation could lead to bid prices above engineers’ estimates. Owner decisions to delay or terminate work are increasing in frequency.

Increased bid prices

With additional demand, labor market pressures may get worse. Contractors may be hard-pressed to find skilled labor, and quality of work may suffer.

Tight labor market

Although a boost from the IIJA should pump up demand, overall lift may be diminished due to inflation and supply chain issues, particularly as the war in Ukraine continues.

Funding versus inflation

The details Surety

Labor shortages, supply chain issues, and financial volatility can cause project cancellations. However, with the Infrastructure Investment and Jobs Act (IIJA), contractors should expect to see a lift in their already high backlogs, as this bill should provide much-needed stimulus for publicly-funded projects.

Surety

How to respond Specialty

The details Specialty

Know the current landscape. Understand the risks of the present-day environment and look for ways to investigate them during the due diligence process. Cyber hygiene Make sure that you have the fundamental cyber security controls in place. Assess your vendor relationships from a cyber security perspective.

How to respond Specialty

M&A concerns*

D&O liability

Employment practices liability risks

Cyber issues

Professional liability E&O risks

*These were the main emerging trends that we focused on in the GTS claims briefing (published in November 2022). Please note that these are area of heightened exposure rather than factors driving demand of the product.

Transactional liability, undisclosed price increases and customer incentives, third-party claims, inventory and ESG issues are all areas of heightened exposure weighing on the industry. Read more from our Liberty Global Transaction Solutions 2022 M&A Claims briefing. Transactional liability: The significant headwinds facing the global economy are likely to weigh on the M&A industry in the coming months. Undisclosed price increases: The inflationary pressures that have built-up due to the supply chain issues created by COVID-19 and the disruption caused by the on-going war in Ukraine could mean that we see more claims relating to undisclosed price changes going forward. Undisclosed customer incentives: The allegation being that customer incentives were either not properly reflected in the accounts or were given outside of the usual course of business. Inventory issues: The supply chain issues that resulted from the pandemic are still not fully resolved and continue to impact businesses and their customers. This is a particularly critical issue for businesses whose operations are heavily reliant on large amounts of diverse inventory. Third-party claims: During times of economic uncertainly, litigation is seen almost as a means of raising revenue. ESG issues: We expect to see more claims arising from ESG-related issues, reflecting the increased importance of this area and the reality that buyers are increasingly expecting sellers to give specific warranties on these issues.

M&A concerns*

With D&O risks on the rise due to financial volatility, boards should be prepared for potential litigation against management in performing fiduciary duties.

D&O liability

When considering layoffs to offset financial losses, businesses should prepare for wrongful termination and discrimination claims.

Employment practices liability risks

As organizations turn to technology to reduce costs, they become vulnerable to cyber-attacks, data breaches, and consequent premium increases.

Cyber issues

As organizations downscale workforces, additional pressure on remaining workers can create missteps and burnout, elevating liability, and lawsuits.

Professional liability E&O risks

The details Specialty

In the Specialty category, the challenges from this economic environment are primarily on financial lines, including professional liability (E&O), management liability (D&O), and mergers and acquisitions (M&A).

Specialty

How to respond Casualty

The details Casualty

Maintain upkeep and safety policies. To help reduce liability claim costs, prioritize expenditures to ensure premises are a safe and secure environment for guests. Notify carrier if operations have changed. Increasing inflation has prompted a move to outsource or automate work. Inform your broker to identify the impact on coverage. Commercial auto policy considerations Promote a culture of safety with clear hiring practices, have policy renewal conversations early, and review coverage terms and conditions to determine whether you will be adequately covered following a loss.

How to respond Casualty

Commercial auto

General liability

Delayed fleet maintenance as companies cut costs by not investing in new vehicles can lead to more accidents. Meanwhile, repair expenses have surged. This trend is predominately caused by worker shortages in the auto industry generating elevated labor costs and supply chain disruptions for several critical vehicle parts.

Commercial auto

Concurrent to the court backlog from COVID-19 closures, labor shortages and supply chain disruptions, economic inflation is ticking up, further impacting casualty lines, and pushing claims costs higher.

General liability

The details Casualty

Casualty lines are subject to multiple inflation factors - compounding the impact of both economic and social inflation.

Casualty

How to respond Property

The details Property

Property valuation reviews To mitigate risk, regular property valuation reviews can help lessen the difference between actual replacement costs and the existing valuation. Regularly scheduled valuations help ensure being made whole in the event of a covered loss.

How to respond Property

Business income coverage

Supply chain issues

Escalating values

Property repairs

Beyond property valuation, it is critical to ensure that business income adequately reflects exposures due to covered slowdowns or damaged property.

Business income coverage

Combined with labor shortages and inflationary increases in the cost of materials, there is a pronounced risk that property values may be understated.

Supply chain issues

While rate increases continue to decelerate, the current inflationary spike in insurable values will likely result in an extension of rising premiums.

Escalating values

Rising labor and material costs have increased costs to repair or replace property, placing additional importance on adequate property valuation.

Property repairs

The details Property

With rising labor and material costs, the cost to repair or replace property has continued to increase, putting further importance on ensuring proper insurance to value.

Property

How to respond Workers Compensation

The details Workers Compensation

Maintain a safe work environment. A highly effective way to manage workers compensation premiums is to reduce claims by ensuring a safe work environment. This is especially important when businesses are welcoming previously remote workers back into the office. Perfect your payroll projections. Plan rates and benefits are determined by payroll projections. Having a mid-year review with your broker can help keep them accurate. Efficiently process claims. Maintaining a transparent claims management process will position you to respond quickly when claims do arise, enabling timely treatment.

How to respond Workers Compensation

Workforce instability

Wage inflation

As workers seek jobs with better wages and benefits, shorter-tenured employment is the new normal, and with it the costs of a shifting payroll.

Workforce instability

With employers paying higher wages to attract employees and fill open jobs, increased costs for workers compensation premiums are also due to rise.

Wage inflation

The details Workers Compensation

As wages have risen to keep up with inflation, workers compensation costs will likely follow, increasing claim costs.

Workers Compensation

Surety

Specialty

Casualty

Property

Workers Comp

Volatility, inflation and the insurance outlook for 2023

The current economy is far from stable. Choppy financial waters can lead to less capital flowing toward risk mitigation, loss controls, workforce safety, and compliance. We’ll explore the challenges we expect clients to face in today’s economy, and how we can provide the best response together.

The details With rising labor and material costs, the cost to repair or replace property has continued to increase, putting further importance on ensuring proper insurance to value. Property repairs Rising labor and material costs have increased costs to repair or replace property, placing additional importance on adequate property valuation. Escalating values While rate increases continue to decelerate, the current inflationary spike in insurable values will likely result in an extension of rising premiums. Supply chain issues Combined with labor shortages and inflationary increases in the cost of materials, there is a pronounced risk that property values may be understated. Business income coverage Beyond property valuation, it is critical to ensure that business income adequately reflects exposures due to covered slowdowns or damaged property. How to respond Property valuation reviews To mitigate risk, regular property valuation reviews can help lessen the difference between actual replacement costs and the existing valuation. Regularly scheduled valuations help ensure being made whole in the event of a covered loss.

Property

The details Casualty lines are subject to multiple inflation factors - compounding the impact of both economic and social inflation. General liability Concurrent to the court backlog from COVID-19 closures, labor shortages and supply chain disruptions, economic inflation is ticking up, further impacting casualty lines, and pushing claims costs higher. Commercial Auto Delayed fleet maintenance as companies cut costs by not investing in new vehicles can lead to more accidents. Meanwhile, repair expenses have surged. This trend is predominately caused by worker shortages in the auto industry generating elevated labor costs and supply chain disruptions for several critical vehicle parts. How to respond Maintain upkeep and safety policies. To help reduce liability claim costs, prioritize expenditures to ensure premises are a safe and secure environment for guests. Notify carrier if operations have changed. Increasing inflation has prompted a move to outsource or automate work. Inform your broker to identify the impact on coverage. Commercial auto policy considerations Promote a culture of safety with clear hiring practices, have policy renewal conversations early, and review coverage terms and conditions to determine whether you will be adequately covered following a loss.

Casualty

The details As wages have risen to keep up with inflation, workers compensation costs will likely follow, increasing claim costs. Wage inflation With employers paying higher wages to attract employees and fill open jobs, increased costs for workers compensation premiums are also due to rise. Workforce instability As workers seek jobs with better wages and benefits, shorter-tenured employment is the new normal, and with it the costs of a shifting payroll. How to respond Maintain a safe work environment. A highly effective way to manage workers compensation premiums is to reduce claims by ensuring a safe work environment. This is especially important when businesses are welcoming previously remote workers back into the office. Perfect your payroll projections. Plan rates and benefits are determined by payroll projections. Having a mid-year review with your broker can help keep them accurate. Efficiently process claims. Maintaining a transparent claims management process will position you to respond quickly when claims do arise, enabling timely treatment.

The details Labor shortages, supply chain issues, and financial volatility can cause project cancellations. However, with the Infrastructure Investment and Jobs Act (IIJA), contractors should expect to see a lift in their already high backlogs, as this bill should provide much-needed stimulus for publicly-funded projects. Funding vs inflation Although a boost from the IIJA should pump up demand, overall lift may be diminished due to inflation and supply chain issues, particularly as the war in Ukraine continues. Tight labor market With additional demand, labor market pressures may get worse. Contractors may be hard-pressed to find skilled labor, and quality of work may suffer. Increased bid prices Sustained inflation could lead to bid prices above engineers’ estimates. Owner decisions to delay or terminate work are increasing in frequency. How to respond Be selective. With abundant backlog, contractors should be more discerning when choosing projects to bid on, to help ensure a healthy level of profit. Emerging technology. Increased application of emerging construction technology and automated or pre-fab building methodologies can help offset the acute labor shortage. Collaborative construction. Collaboration between public project owners and contractors could help mitigate unexpected price movement and supply uncertainties.

Surety

The details In the Specialty category, the challenges from this economic environment are primarily on financial lines, including professional liability (E&O), management liability (D&O), and mergers and acquisitions (M&A). Professional liability E&O risks As organizations downscale workforces, additional pressure on remaining workers can create missteps and burnout, elevating liability, and lawsuits. Cyber issues As organizations turn to technology to reduce costs, they become vulnerable to cyber-attacks, data breaches, and consequent premium increases. Employment practices liability risks When considering layoffs to offset financial losses, businesses should prepare for wrongful termination and discrimination claims. D&O liability With D&O risks on the rise due to financial volatility, boards should be prepared for potential litigation against management in performing fiduciary duties. M&A concerns* Transactional liability, undisclosed price increases and customer incentives, third-party claims, inventory and ESG issues are all areas of heightened exposure weighing on the industry. Read more from our Liberty Global Transaction Solutions 2022 M&A Claims briefing. Transactional liability: The significant headwinds facing the global economy are likely to weigh on the M&A industry in the coming months. Undisclosed price increases: The inflationary pressures that have built-up due to the supply chain issues created by COVID-19 and the disruption caused by the on-going war in Ukraine could mean that we see more claims relating to undisclosed price changes going forward. Undisclosed customer incentives: The allegation being that customer incentives were either not properly reflected in the accounts or were given outside of the usual course of business. Inventory issues: The supply chain issues that resulted from the pandemic are still not fully resolved and continue to impact businesses and their customers. This is a particularly critical issue for businesses whose operations are heavily reliant on large amounts of diverse inventory. Third-party claims: During times of economic uncertainly, litigation is seen almost as a means of raising revenue. ESG issues: We expect to see more claims arising from ESG-related issues, reflecting the increased importance of this area and the reality that buyers are increasingly expecting sellers to give specific warranties on these issues. How to respond Know the current landscape. Understand the risks of the present-day environment and look for ways to investigate them during the due diligence process. Cyber hygiene Make sure that you have the fundamental cyber security controls in place. Assess your vendor relationships from a cyber security perspective.

Specialty