London, UK. – July 10, 2024. Costero Brokers, Costero Brokers Ltd., a privately held London-based brokerage, is delighted to announce the appointment of Stephanie Bush to its board of directors.

Bush brings a wealth of industry expertise and leadership acumen to Costero Brokers Ltd. She recently concluded her tenure at The Hartford as Executive Vice President and Head of Small Commercial and Personal Insurance. Throughout her career at The Hartford, she advanced through various roles in commercial insurance product management, underwriting, and field operations. In 2013, she was appointed Chief Product and Underwriting Officer for Small Commercial, and in 2014, she was promoted to Head of Small Commercial, later expanding her responsibilities to include Personal Lines in 2018.

“I am honored to join the Costero Brokers’ Board of Directors,” said Stephanie Bush. “I have long admired John Tallarida’s leadership and his unwavering focus on delivering innovative client solutions.”

“Stephanie is a valued friend, and I am delighted to welcome her to the Costero board,” said John Tallarida, CEO of Costero Brokers. “Her extensive experience and enthusiasm will be invaluable as we steer the continued growth of Costero Brokers in the UK.”

Bush’s appointment emphasizes Costero Brokers’ commitment to assembling a diverse and seasoned board focused on the company’s progress.

About Costero Brokers Ltd.

Costero Brokers Ltd., formed in 2017, is an independent, dynamic, and entrepreneurial insurance and reinsurance Lloyd’s of London wholesale broker specializing in finding capacity for hard-to-place or emerging risks. Costero focuses on open market facultative, binding authority, reinsurance, and alternative risk transfer business placed into Lloyd’s of London, European, and international company markets. Whether clients are brokers, coverholders (MGAs), captives, or insurers, the team draws upon steadfast relationships with underwriters and is passionate about delivering tailor-made solutions to their insurance and reinsurance needs. Costero Brokers is an approved Lloyd’s coverholder, which it uses strategically to support clients’ business.

For more information, visit costerobrokers.com.

Are your clients at risk for AI washing or AI drift litigation? It seems common practice for tech-enabled firms to almost boast about their use of new AI-based technologies in their day-to-day operations. If those boasts turn out to be less than truthful, or if the AI drifts or suffers from AI hallucinations and generates incorrect results then investors, customers, and regulators may take action. This is an emerging threat, but Costero helps clients prepare.

What Is AI Washing?

AI washing describes the practice of overstating AI capabilities, whether through exaggeration, misleading statements, or outright lies. Since many people are impressed with new AI capabilities, companies want to look like they’re using cutting-edge tools to attract customers and investors. However, if the claims prove to be deceptive, companies may be held accountable for misleading customers and investors.

What Is AI Drift?

AI model drift occurs when the real-world data model encounters deviates from the data it was trained to recognize or handle.

AI hallucinations are incorrect or misleading results that AI Models generate. These errors can be caused by a variety of factors, including insufficient training data, incorrect assumptions made by the model, or biases in the data used to train the model.

The First AI Washing Fines

The U.S. Securities and Exchange Commission (SEC) has settled charges against two investment advisers over AI washing.

According to the SEC announcement, Toronto-based Delphia Inc. was accused of making false and misleading statements in its SEC filings, in a press release, and on the company website regarding its use of AI and machine learning. Delphia claimed to be using collective data to power an AI tool that predicted which companies and trends were about to become big. However, the SEC found that Delphia did not have these capabilities. The SEC also found that Delphia was violating the Marketing Rule and ordered the company to pay $225,000.

The announcement also mentions San Francisco-based Global Predictions, which was accused of making false and misleading statements on its website and social media about its use of AI. Global Predictions claimed to be the first regulated AI financial advisor and said its platform provided AI-driven forecasts – claims the SEC found to be false. The SEC also found that Global Predictions violated the Marketing Rule by falsely claiming that it offered tax-loss harvesting services and by including an impermissible liability hedge clause. It ordered Global Predictions to pay $175,000.

Lastly, the SEC has issued an investor alert on AI and investment fraud. This warns investors that some unregistered and unlicensed investment platforms are claiming to use AI that guarantees good returns, when, in fact, they are running investment schemes.

The EU AI Act of Jan 2024

This new piece of EU legislation called the AI Act imposes significant sanctions for non-compliance, which can include fines of up to 7% of global annual turnover per violation for the most serious infringements – or up to 35 million euros, whichever amount is higher.

More Action May Be Coming

According to SEC Chair Gary Gensler, AI washing by financial intermediaries or companies raising money from the public may violate securities laws. “Public companies should make sure they have a reasonable basis for the claims they make and yes, the particular risks they face about their AI use, and investors should be told that basis,” he said in a statement on AI washing.

Consider the SEC actions against Delphia and Global Predictions to be a warning. The hype over AI has exploded in recent years. However, companies that make unfounded claims to leverage this excitement may be hit with regulatory action and lawsuits, as has already happened with greenwashing. Even companies that aren’t deliberately deceiving customers and investors may face accusations of AI washing if they exaggerate their claims and fail to disclose risks.

How Can Costero Help Their Clients?

Whenever new risks emerge, brokers can help their clients in two ways:

• Raising awareness. Although the recent SEC actions against AI washing have received considerable attention, some business leaders may be unaware of what’s happening. Brokers should share information on all AI trends and encourage clients to assess whether they can back up their claims regarding AI with solid facts. The securities actions are most relevant to financial advisors and companies raising money from the public. However, since other companies could face lawsuits from customers who feel deceived by AI claims, they should also consider their exposures.
• Discuss insurance coverage. Although preventing claims is always ideal, it’s still important to obtain insurance in case a claim does occur. This is important even when companies are confident, they are not violating any rules. If AI washing litigation surges, some companies may face unfounded claims. Insurance will help them defend themselves against such claims.

Costero has access to specifically tailored AI insurance products offered globally that can provide first and third-party liability cover against AI-related claims including AI washing, AI drift, and a warranty product for purchases of AI software.

To access these creative insurance solutions, please contact Jamie Webb at jwebb@costerobrokers.com or Contact us.

Self-driving cars may be taking longer than expected, but it looks like they could be coming to the UK in the near future. In addition to the impact on transportation norms and businesses, the rise of self-driving cars has significant implications for insurance.

Self-Driving Levels

When people talk about self-driving vehicles, also called automated vehicles, they may be referring to varying levels of automation. According to the United States Environmental Protection Agency, these levels are as follows.

• Level 0 cars have no automation. However, they may have automated safety features, such as automated emergency braking.
• Level 1 cars use automation for driver assistance. These cars may be able to control speed or steering, but not both simultaneously. Examples of level 1 systems include adaptive cruise control and lane assist technology.
• Level 2 cars can control both speed and steering simultaneously under certain conditions. However, the driver still needs to be fully alert and ready to take the wheel.
• Level 3 cars have conditional automation. These cars can control speed and steering, monitor the surroundings and drive on their own under certain conditions. However, the driver still needs to be fully alert and ready to take the wheel.
• Level 4 cars are highly automated and can handle most normal driving conditions. If the vehicle encounters conditions it cannot handle, it should pull over and stop on its own.
• Level 5 cars are considered fully automated. These cars should be capable of driving on their own in all conditions.

The Timeline for Self-Driving Vehicles

Many self-driving vehicles are being tested on US roads. According to Motor Trends, seven states allow self-driving vehicles to operate without a driver behind the wheel or without a licensed driver as long as the vehicle is classified as level 4 or level 5. Some other states also allow self-driving vehicles with varying requirements.

In the near future, high-level automated vehicles could also be seen on UK roads. According to Insurance Journal, Mark Harper, UK transport minister, says self-driving cars could be on some UK roads by as early as 2026. These cars could have full self-driving capabilities.

Self-Driving Vehicle Uses

Self-driving vehicles could have a major impact on personal transportation and business operations.

• Self-driving trucks could revolutionize trucking. The US Library of Congress says fully autonomous trucks are expected on US highways by 2027. Automated truck platoons in which only the lead truck has a driver are also expected.
• Self-driving taxis could provide another option for individuals. Waymo is already operating what it calls “the world’s first autonomous ride-hailing service” and is available to the public in Phoenix, Arizona, and San Francisco, California.
• Self-driving personal vehicles could remove the need for driving skills. Some vehicles already have some autonomous capabilities. Tesla’s system is currently at level two, according to Drive.

Self-Driving Safety Concerns

Self-driving vehicles have raised safety concerns.

In 2018, the first death involving a fully autonomous vehicle occurred in Arizona when an Uber self-driving vehicle struck a pedestrian. According to CNN, the test driver behind the wheel at the time was supposed to be monitoring the car and pleaded guilty to endangerment. More recently, Reuters says a General Motors Cruise robotaxi struck and dragged a pedestrian six meters after the pedestrian was hit by another vehicle. The pedestrian was severely injured.

Researchers at King’s College London found that autonomous vehicles have trouble detecting children and darker-skinned pedestrians.

Other things can also confuse autonomous vehicle sensors. According to Business Insider, a Tesla owner shared a video in which his vehicle mistook the moon for a yellow light and slowed down. There have also been reports of Tesla systems being confused by the sun or a billboard showing a stop sign.

Then again, human drivers are far from perfect. The difference is that when a human driver causes an accident, it’s often fairly straightforward to assign blame. When self-driving systems are involved, the situation can become more complicated.

Who Is Liable for Self-Driving Crashes?

Let’s say a company starts using fully self-driving trucks. One of the trucks is involved in a crash when the autonomous system fails to detect another vehicle. The driver of the other vehicle is seriously injured. In this case, who is liable – the trucking company or the vehicle manufacturer?

According to Insurance Journal, UK legislation announced in November would make car makers legally liable for crashes. This means the owners of self-driving vehicles would not be held liable for crashes caused by self-driving systems.

However, other jurisdictions may have different rules. There may also be cases in which the owner of the vehicle is deemed to be partially at fault, for example, for making changes to the vehicle or failing to provide necessary maintenance. These are new issues, so a lot remains uncertain.

As self-driving cars become more common, insurance will need to adapt. According to MarketWatch, the traditional model of insurance may need to change to hold manufacturers and software developers accountable. Coverage will also be needed for new risks, such as faulty cybersecurity and GPS systems.

Insurance for self-driving cars / trucks may not be an immediate concern for UK drivers and businesses, but Costero remains on the cutting edge of these emerging risks that new technology brings. If you want to discuss any potential opportunities for automated fleets of vehicles or professional indemnity or products liability for the technology driving it then Costero can help. Learn more.

A lot can change in a year. For your business clients, a new year may bring business growth along with new risk exposures. Even if policyholders seem happy, their current coverage may be failing to meet new needs. Brokers can provide value by conducting a thorough annual coverage review to ensure business clients still have adequate coverage.

1. Look for Coverage Gaps

Most business owners aren’t insurance experts. In fact, they may have many misconceptions about their insurance coverage. For example, they might think their property insurance will cover flood damage, when, in fact, it excludes this. As a result, they won’t try to obtain flood insurance – until a loss occurs and they realize they don’t have coverage. Regular reviews help business owners recognize coverage gaps and decide whether they want to secure additional coverage.

2. See Whether Consolidation Is Possible

Rising insurance prices have become a burden for many business owners. Although brokers can’t shield their clients from all premium increases, they may be able to help clients save money by consolidating coverage. In addition to reducing coverage overlaps, this may make the client eligible for discounts. As a bonus, coverage consolidation simplifies the claims process when a loss occurs.

3. Determine Whether Higher Limits Are Desirable

Businesses typically need to raise their insurance limits to keep up with growth. Recently, high inflation rates mean businesses may need to increase their limits even more often than normal.

Although this seems simple, there’s a lot to consider. Both property and liability limits may require adjustment. You also should consider whether any sublimits within a policy are too low – even if the main policy limit is high enough, low sublimits may mean policyholders don’t have the coverage they need when a claim occurs. Finally, it’s important to assess both aggregate and per-occurrence limits.

4. Assess New Exposures

New exposures may stem from many causes. For example, a business may encounter new exposures as it grows and hires more staff, as this increases the risk of employment-related lawsuits. Businesses that move into new sectors or begin offering new services will also see new risk exposures. For instance, a grocery store that begins offering delivery services will have new auto exposures. Changes in operations (such as the adoption of new AI systems) may also create additional risks. A careful review of operations will help uncover new risks that may require additional insurance.

Risk exposures may also come from external factors. For example, new data privacy laws mean businesses face increasing litigation and regulatory risks. Changes in society, including an increased focus on things like greenwashing and equity, may also lead to new or increased exposures. Brokers can help clients keep up with trends in legislation and litigation to determine whether they need additional coverage.

5. Review Policy Changes

Insurers who decide to renew policies may introduce changes to the coverage. In some cases, these alterations to coverage may be part of widespread changes. For example, Lloyd’s cyber policies that renew after March 2023 are subject to new exclusions for state-backed cyberattacks.

Since policy changes may impact the amount of coverage available or even whether they cover a claim at all, it’s important to review these changes carefully. Brokers can help their clients by pointing out any changes and discussing exactly what’s different. If the coverage is no longer adequate, brokers can help their clients look for supplemental coverage or discuss switching to a different insurer.

6. Consider Alternative Strategies

In some cases, conventional insurance strategies may not be the best option, either because coverage is too expensive to be worthwhile or because the terms are too limited. This may happen suddenly – for example, when an insurer drastically raises rates or cancels coverage – or it may happen gradually, such as when cumulative premium increases and coverage restrictions add up to coverage that is no longer adequate. Business growth and development may also play an important role.

Brokers can help by discussing alternative insurance strategies, such as parametric insurance. Even if you’ve offered these options before, it may be worth doing so again, since your client’s needs may have changed.

Providing Value in a Hard Market

Rising insurance costs make the job of a broker difficult. By meeting with clients to conduct a thorough annual coverage review, you can help them secure the protection they need while demonstrating your value.

Do you need help finding coverage for your clients? Costero offers parametric insurance policies and other creative insurance solutions. Contact us.

Remote work offers many advantages – from convenience for workers to reduced office costs for employers. However, remote work also complicates cybersecurity. As remote and hybrid arrangements become solidified in UK work culture, employers are having to contend with what this means for cyber risks.

Remote Work Is Expanding

Startups surveyed 546 business owners in late 2023 and found that 66% were offering flexible working, whereas just 28% had workers in the office on a full-time basis. Furthermore, 14% of UK businesses say they’re planning to increase the number of days their staff can work remotely in 2024, whereas only 6% say they’re planning to require workers to come into the office more.

What began as a necessity to deal with the COVID-19 pandemic has become a way of life for many workers. Remote arrangements allow workers to cut out commutes and enjoy the benefits of workplace flexibility. This may also be good for employers, who cut back on office costs and increase employee satisfaction. However, it’s important to address the elephant in the room: cybersecurity.

Cybersecurity Is a Serious Challenge

Phishing, ransomware, business email compromise, and other cyberattacks are a significant threat to businesses. In the Cyber Security Breaches Survey, 32% of businesses said they had experienced a cyber breach or attack in the last 12 months.

These attacks are often devastating. A report from the Royal United Services Institute shows the many ways ransomware can do harm, which include financial loss, damage to digital systems, and deterioration of client trust as well as stress and job loss for workers. The report even found that cyberattacks may have traumatic psychological effects on victims.

Unfortunately, the situation is likely to become worse. According to the National Cyber Security Centre, artificial intelligence is expected to lead to an increase in cyberattacks over the next two years.

To reduce the risks of cyberattacks, businesses should leverage a wide range of tactics that encompass IT controls as well as cyber-smart practices and worker training. However, remote work makes this more complicated.

How Remote Work Impacts Cybersecurity

Remote work is not always a cybersecurity risk, but it may contribute to increased risks for a number of reasons:

• Remote workers may not be using secure connections. For example, they may work from coffee shops with public Wi-Fi or use a home Wi-Fi setup that is not password protected and that neighbors and passersby can access.
• Physical devices may get lost in transport. Laptops and flash drives become security risks if they are lost, stolen, or otherwise fall into the wrong hands. The risk of misplaced devices increases if workers regularly transport devices between home and work or other locations.
• Remote workers may mix personal and professional computer use. For example, a worker may use a personal computer to access business accounts, or vice versa. This may create additional cyber exposures if the personal devices or accounts are not secure. Although this may happen in the office, it is more likely to happen at home.
• Remote workers may be more vulnerable to social engineering. Imagine an HR professional receives an email from a coworker who says he has a new bank account for salary deposits. If the coworker is just down the hall, it’s easy to confirm this in person. When working remotely, confirmation is more of a hassle, which may leave companies vulnerable to payroll diversion and other social engineering scams.
• Hackers can exploit Remote Desktop Protocol (RDP). RDP allows individuals to access devices remotely. Whereas this may be convenient for remote work, it may also create an opening for hackers.

How Brokers Can Help Clients

As business clients continue to adapt to remote work, brokers can help them navigate growing cybersecurity risks. In addition to offering cyber insurance, brokers can provide:

• Tips on how to set up secure computer systems, Wi-Fi networks, and RDP.
• Resources for worker training and education, including for cybersecurity.
• Guidance around cybersecurity policies for remote workers, including rules on network security.
• Alerts on new attacks and vulnerabilities in the news.

The National Cyber Security Centre offers some resources for small businesses. Insurance carriers may also provide resources.

Do you need help securing cyber insurance for your clients? Costero offers commercial cyber insurance covering response costs, reputational harm, system damage, and business interruption.

To Learn more, please contact Divisional Director of Costero’s Cyber Division:

Jonathan Olley

Email: Jonathan.Olley@costerobrokers.com

Direct Line: +44 (0)20 8051 5162

Mobile: 07792592533

Is it possible that your client’s work or service could result in another person or entity’s financial loss? If so, your client may need professional liability insurance.
Without professional liability insurance (sometimes called errors and omissions insurance), some of your clients may be terribly exposed in the event of a lawsuit. Professional liability insurance provides invaluable protection for a wide variety of occupations. It’s important for brokers to help their clients identify the need and understand the value of professional liability insurance, and secure appropriate coverage.

Who Needs Professional Liability Insurance?

Many types of professionals benefit from professional liability insurance. In fact, this insurance is suitable for any type of professional who provides services that may lead to financial harm in the event of negligence or oversight.

Some examples of professionals who should purchase E&O coverage include:

• Architects
• Engineers
• Designers
• Contractors
• Surveyors
• Accountants
• Financial Planners
• Consultants
• Charity and Pension Trustees
• Health and Safety Inspectors
• Real Estate Agents
• IT Professionals
• Advertising & Media Agencies

How Does Professional Liability Insurance Protect Professionals?

Professional liability insurance provides coverage for third-party claims involving financial loss stemming from professional services. Typically, a client will file a claim alleging that negligence, oversight, misrepresentation, inaccurate advice, or failure to maintain professional standards led to a financial loss. Professional liability insurance will cover the resulting defense costs as well as any settlements or awards, up to the policy limit.

General liability insurance does not cover this type of lawsuit – it provides coverage for third-party claims involving bodily injury, property damage, and personal and advertising injuries. Since many professionals have both professional and non-professional risks, they may need both professional and general liability insurance. Contractors are a perfect example – different types of contractor mistakes and oversights could result third-party damage, bodily injury or a client’s financial loss.
Medical malpractice insurance is a type of professional liability insurance. However, unlike other types of professional liability insurance (and due to the nature of medical services), medical malpractice insurance covers cases of bodily harm tied to professional services.

Examples of Professional Liability Insurance in Action

1). A surveyor is hired to measure the boundary of a property. The property owner uses the results when having a fence built. A neighbor objects to the fence, claiming it’s on his property, and hires a different surveyor. It turns out that the initial survey was incorrect, likely due to a malfunction in the equipment the surveyor used. Now, the property owner needs to take down and rebuild the fence, which will cost thousands of dollars. The property owner sues the surveyor.
2). An accountant prepares a tax filing for a wealthy individual. However, the accountant delays filing because he is waiting for clarification on a recent change in the tax code. Things become busy during tax season, leading the accountant to forget to follow up and file. The client misses the tax deadline and is penalized. As a result, the client sues the accountant.
3). A real estate agent is representing a buyer. The buyer makes an offer on a house that has a history of squatters, but the real estate agent doesn’t disclose this because she assumes the squatters have left. When the sale closes and the buyer takes possession, it becomes clear that the squatters have not left, and they now refuse to do so. The buyer files a lawsuit against the real estate agent for failing to disclose important information.

These are just a few scenarios that may result in lawsuits against professionals. Risks like these show how professional liability insurance provides important protection.

Key Points to Make When Discussing Professional Liability Insurance

Some professionals may be reluctant to buy professional liability insurance because they don’t think they need it. Brokers can help the professionals they serve by educating them. Some points that demonstrate the value of this type of product include:

• No one is perfect. Buying professional liability insurance is not an admission that you’re bad at your job. The reality is anyone may make an occasional mistake.
• Even baseless claims may be costly. Without insurance, professionals may feel like they have to settle to avoid lengthy and costly court battles, which may lead to reputational harm.
• Professional liability insurance protects professionals and their clients. If clients are harmed, coverage can make them whole again.

Do you need help accessing professional liability insurance that safeguards your clients? Costero Brokers can help. Learn more.

Costero Brokers has access to the Lloyd’s Market E&O lineslip which provides Professional Liability Insurance to hundreds of industry types / professional services. We can also tailor bespoke coverage to fit our clients needs. For more please email our specialist Jamie Webb at jwebb@costerobrokers.com

According to GlobalData, the UK commercial motor insurance market is expected to experience a compound annual growth rate of 4% between 2022 and 2027. Soaring premiums caused by rising claims costs are fueling this increase in gross written premium.

For fleet operators, these premium increases threaten budgets and reduce profitability. Brokers can add value by helping their clients control both their claims and their costs. There are four main types of technology your business clients should be aware of: driver monitoring systems, forward-facing cameras, vehicle monitoring systems, and anti-collision systems.

1. Driver Monitoring Systems

Drivers who speed, brake too hard, accelerate too fast, or nod off at the wheel may cause crashes. Although employers may have policies against risky driving practices, they may not be enough to prevent drivers from developing bad habits. The only way to be completely certain that drivers are operating safely is to monitor them.

Modern telematics systems make this possible. These systems monitor vehicle usage and can even analyze the driver for signs of fatigue, which enables businesses to identify and correct dangerous behaviors before a crash occurs. Unfortunately, some businesses have yet to adopt this impressive technology. A UK survey from Fleet200 Strategy Network found that 73% of LCV fleets and 52% of car fleets monitor their drivers’ behavior.

2. Forward-Facing Cameras

Whereas in-cab cameras monitor drivers, forward-facing cameras (or dashcams) monitor road conditions and other drivers. The information forward-facing cameras collect can help exonerate a driver after a crash, thereby helping to depend the company from liability claims.

Imagine your driver stops at a light behind another car. The other car suddenly backs up and hits your company’s vehicle. The driver of the other vehicle claims your driver suddenly accelerated, which resulted in a rear-ending. Another driver acts as a witness to confirm this is the correct version of events. Your driver is the victim of a staged accident, but without dashcam footage, it may be hard to prove.
Dashcam footage can also show when your drivers are cut off or are the victims of road rage.

3. Vehicle Monitoring Systems

Faulty brakes, worn tyres, and other vehicle maintenance issues may contribute to crashes. In fact, according to the Federal Motor Carrier Safety Administration, vehicles targeted for interventions due to vehicle maintenance had a 65% greater risk of a future crash compared to the U.S. average.

Telematics systems help fleet operators stay on top of maintenance by providing real-time data on vehicle performance and maintenance issues. Although this is an investment, it helps fleets save in the long run by preventing crashes and related insurance rate increases. These vehicle monitoring systems also help fleets avoid downtime and reduce overall maintenance costs by fixing issues before they cause additional damage.

4. Anti-Collision Technology

Collision-avoidance technology has come a long way in recent years. According to the Insurance Institute for Highway Safety, forward collision warning and automatic emergency braking systems prevent or mitigate many crashes involving large trucks. Forward collision warning systems are associated with a 22% decrease in police-reportable crashes, whereas automatic emergency braking systems are associated with a 12% decrease.

By investing in new vehicles with advanced safety features, companies can save lives while controlling their claims and insurance costs.

Are Your Clients Eligible for a Discount?

Insurers may offer discounted rates for certain safety features. If your clients are already using advanced safety features, make sure they’re receiving all the discounts they qualify for and determine whether a different insurer might offer larger discounts. If your clients are not using advanced safety features yet, the possibility of insurance discounts may be the incentive they need to make the investment.

Do you need help finding commercial motor insurance solutions for your clients? Costero Brokers can help. Learn more.

Extreme weather has already led to losses in 2024, with more events expected. Although policyholders can’t control the weather, they can take steps to reduce their risks. Brokers can provide value by helping them prepare.

Severe Weather Is a Top Concern

The World Economic Forum’s 2024 Global Risk Report named extreme weather as a critical challenge facing humanity. It also cited critical changes to Earth systems and biodiversity loss as major risks.

The European Commission warns that climate change will have far-reaching consequences, including more droughts and wildfires, rising sea levels, less predictable rainfall patterns, and more intense storms. Climate change also represents a threat to business due to its risk to infrastructure and buildings and its impact on various industries, such as agriculture and energy.

The Costs Are Mounting

The World Economic Forum says extreme weather events are becoming less predictable, more common, and more expensive. Over the past five decades, the average cost per event has increased by approximately 77%. As an example of what severe weather can do, flooding in Germany, Belgium, Luxembourg, and the Netherlands in July 2021 killed 200 people and caused $43 billion in damages.

Recent storms in the UK haven’t caused that level of damage, but they’ve still been destructive. According to Insurance Journal, Storm Henk damaged around 2,000 properties and caused approximately £150 million in insured losses.

Worse storms are possible. PwC warns that intense flooding may cause insured losses of up to £1.6 billion in the UK.

Property Owners May Be Unprepared

Property owners may not be keeping up with rising risks. Some property owners may underestimate their exposures because they’re basing their assessments on historical losses. As climate change leads to more losses, they may be caught off guard. Even property owners who understand that risks are growing may lack the insurance protection they need, either because they don’t understand the exclusions in their policies or because they don’t know how to access the correct coverage.

For instance, according to PwC, many UK property owners have obtained more affordable flood insurance through Flood Re. However, Flood Re does not insure homes built after 2009, blocks of more than three residential flats, or commercial properties, which leaves many properties exposed, without coverage.

Are Your Clients Protected?

Brokers are in the perfect position to help property owners prepare for extreme weather losses.

• Help your clients understand their exposures. Some property and business owners may incorrectly think they don’t have to worry about flooding or storms because they haven’t experienced major problems in the past. As storms become more severe and unpredictable, more properties will be in harm’s way. Gov.UK has a service that lets anyone check the flood risk of an area.

• Encourage clients to consider property improvements that reduce extreme weather risks. For example, Gov.UK says property owners may be able to reduce flood damage by installing non-return valves and flood doors, moving electrical sockets higher up, and laying tiles instead of carpet.

• Provide tips when flooding is imminent. According to Gov.UK, if a property is about to be flooded, you should turn off the gas, electricity, and water supplies, as long as it is safe to do so. (Don’t touch any electrical switches if you’re standing in water.) You should also use any flood protection products you have, such as flood barriers or air brick covers, and then move people, pets, vehicles, and important items to safety.

• Provide resources to help clients create an emergency plan. After a severe weather event, the recovery begins. Brokers should help their clients navigate insurance and repair issues. For businesses, an emergency response plan will reduce the amount of business disruption caused by the disaster.

• Review your clients’ insurance needs. Your clients may think they have coverage, but if a severe storm hits, they may find out they were less protected than they thought. Brokers should help clients avoid unpleasant surprises by looking for coverage gaps before a storm occurs. Do they have coverage for flood losses? Are the limits high enough? Are there any other gaps or exclusions that may cause issues?

• Consider alternative insurance options. For clients who are having trouble accessing flood insurance, parametric insurance may be the solution. Since parametric policies pay claims based on triggering events and not actual losses, the claims process tends to be fast. However, since underwriting may take longer, don’t wait until the last minute to secure coverage for your clients.

Do you need help finding property and flood coverage for your clients? Costero offers parametric insurance policies and other creative solutions to help you ensure your clients are protected. Contact us.

As a broker, you help your clients secure coverage in good times and in bad. Sometimes your work is more challenging – and right now is one of those times. On a brighter note, there’s never been a better opportunity to showcase the value you bring. In a hard market, your expertise, creativity and market connections can make a real difference, helping you build client trust and loyalty that will last for years to come. Below are some crucial step to help you stand out.

#1: Help Clients Understand the Causes Behind the Hard Market

According to the Association of British Insurers (ABI), bad weather, higher rebuilding costs, and inflation have forced insurers to raise their premiums. In the fourth quarter of 2023, six named storms and a tornado hit the UK. Insurers paid out £352 million in home insurance claims following Storms Babet, Ciaran, and Debi.

Education is the first step in helping policyholders navigate a hard insurance market. Once your clients understand what’s happening in the market, they can work with you to control their risks and shop for coverage. Rate hikes are even worse for clients who are not prepared.

#2: Educate Clients About the Go-to-Market Process

When the insurance market favours policyholders, renewals tend to go smoothly and purchasing coverage is quick. In a hard insurance market, however, purchasing insurance requires more time and effort. Policyholders may find out that their insurers are raising their rates or reducing their coverage, resulting in a policy that no longer meets their needs.

This is an opportunity to shine, but you only do so if you allow enough time. Engage your clients well ahead of their policy x-dates and explain the process that lies ahead. Let them know how many markets you’ll be contacting on their behalf, and what to expect from stricter underwriting standards. Work with them to develop a strong application. Keep them informed every step of the way – even if you don’t have good news yet. In the absence of information, clients may assume you’ve forgotten about them.

#3: Help Clients Proactively Address Potential Exposures

In a soft insurance market, accountholders with attractive risk profiles have an easy time securing low rates, whereas accountholders with higher risks tend to pay higher rates and may have a harder time securing coverage. In a hard market, even accountholders with attractive risk profiles may have a hard time securing robust coverage and their rates will likely be higher. For accountholders with higher risks, finding affordable coverage in the traditional insurance market may be almost impossible.

Brokers can help their clients by educating them on how to proactively address potential exposures and keep claims low. This isn’t something that should only happen once a year at renewals – by then, it may be too late to do anything. Instead, brokers should provide information throughout the year to explain why risk management is important and what clients can do.

#4: Think Beyond Traditional Insurance

In a hard property insurance market, some of your business clients may be unable to find traditional insurance that’s adequate for their needs. Carriers may refuse coverage outright or premiums may be too high and coverage too restrictive.

If you don’t offer these clients any other options, you risk losing them. By working with a wholesale broker, you can extend your expertise and your toolbox of options.

For example, parametric insurance is an option that’s helping a lot of companies. Parametric insurance pays claims based on the magnitude of triggering events – unlike traditional insurance, which pays claims based on actual losses. Parametric insurance often covers natural disaster perils, but you can find coverage for nearly any type of event it is possible to independently verify and which your clients do not have adequate coverage for through traditional insurance. For example, a client who is unable to find coverage for hail damage may like to secure a parametric policy that covers hail.

Parametric insurance offers many advantages, including a high level of flexibility and fast claims payouts. One downside is the underwriting process may be lengthy. This is yet another reason to reach out to your clients early and start exploring insurance options as soon as possible.

Do you need help finding coverage for your clients? Costero Brokers offers creative solutions to help you stand out in today’s hard market. Learn more.

International conflicts are heating up – and businesses may get caught in the crossfire. With the risks of wars and terrorism increasing, brokers should protect their clients by recommending insurance products.

Global Conflicts Are on the Rise

In 2023, the United Nations stated that the world was experiencing the highest number of global conflicts since the Second World War. According to Crisis Group, the top 10 global conflicts to watch in 2024 include the ongoing Israeli-Palestinian conflict in Gaza, the potential for wider war in the Middle East, and the continuing Russia-Ukraine war.

These conflicts impact international business in numerous ways – the recent attacks in the Red Sea are a dire reminder of this. According to the BBC, the Houthis are an Iranian-backed rebel group that views Israel as an enemy. They’ve been attacking ships they claim are Israeli owned, flagged, or operated or headed to Israeli ports. The Guardian says Houthi rebels claim they have successfully targeted both a British and a U.S. ship. Reuters says a recent attack also targeted a Greek-owned cargo ship carrying corn from Brazil and bound for Iran.

AP News says some shipping container companies are avoiding the Red Sea by sending ships around Africa and the Cape of Good Hope, but this may add a week or two to the transit time while increasing costs for fuel and other expenses. The attacks and subsequent delays contributed to a 1.3% decline in world trade in December.

Kidnap and Ransom Risks Are Also Increasing

When leaders travel internationally, it exposes businesses to kidnapping and ransom risks. For example, Sky News says Colin Armstrong, a British businessman, was recently kidnapped while in Ecuador at a ranch he owns. His partner was also kidnapped. Control Risks warns that global kidnapping rates have been increasing since 2019, a trend that is expected to continue. The average ransom demand has also increased – from $259,913 in 2019 to $368,901 in 2021, an increase of 42%.

According to Canadian Lawyer, the regions with the highest kidnap and ransom risks are Mexico, Venezuela, Brazil, Nigeria, India, Haiti, Colombia, the Philippines, Gulf and Aden/Indian Ocean/Gulf of Benin, and Pakistan. However, kidnapping can occur anywhere. Deccan Herald says a businessman was kidnapped in the West Midlands region of England in 2023 and was only released after the kidnappers’ ransom demand was met.

Terrorism and Riots Increase Exposures

Riots, protests that turn violent, and terrorist attacks threaten businesses by causing property damage or restricting access to locations. Cyber terrorism is also a significant threat.

Ongoing international conflict and the tensions created by these conflicts mean some areas may have an increased risk of terrorism. As of February 13, 2024, the current threat level in the UK is “substantial” and the current threat level in Northern Ireland is “severe.”

Many Insurance Policies Exclude War-Related Risks

Most commercial property, business interruption, and other insurance policies have a war exclusion that bars coverage for acts of war and related losses. Cyber insurance often includes war exclusions as well. In fact, Lloyd’s of London recently introduced new requirements for war exclusions in cyber insurance policies.

This does not mean businesses cannot obtain coverage for losses stemming from war. However, it does mean they may need to secure standalone coverage for these risks.

What Coverage Do Your Clients Need?

Coverage needs vary between businesses. For example, businesses that operate factories, power plants, or other sensitive facilities in areas with political instability may have elevated coverage needs. Businesses that ship goods internationally or send leaders abroad for meetings may also have substantial coverage needs.

Brokers should review the following needs with their clients:

• How would terrorism, active assailants, riots, civil commotion, or war impact business? Consider the risk of property damage as well as the threat of business interruption and event cancellation.
• Are business leaders exposed to kidnap and ransom risks? If business leaders travel to countries where kidnap and ransom schemes are common, the risk may be significant. Anyone traveling with them, including family or assistants, could also be at risk. In addition to covering financial losses, kidnap and ransom insurance provides risk and crisis management to keep employees and their families safe.
• Are your goods or supplies at risk? As the recent Red Sea attacks show, goods in transit may become targets during international conflict.
• Are you protected from cyber terrorism? Cyberattacks are often as costly as physical attacks, causing damage to computer systems, business interruption, and reputational harm.

Do you need help placing coverage for your clients? Costero offers bespoke war, political violence, terrorism, and kidnap and ransom insurance solutions. Learn more.