Liberty Mutual | Published 12/07/2022 | Specialty Lines Insurance

It’s no secret that the COVID-19 pandemic has had a devastating effect on many businesses. What began with supply chain issues soon transformed into even more complicated challenges, including labor market difficulties, an economic recession, and fraught geopolitical obstacles.

These changes left risk managers and other business stakeholders looking for innovative ways to help protect their specific and sometimes unusual risks — something they could only find in the specialty lines market.

Kristin McMahon, senior vice president, Global Risk Solutions North America specialty claims for Liberty Mutual and Ironshore, outlines five trends affecting the specialty lines market that businesses should be aware of and prepare for in the current risk environment.

1. Cyberattacks continue to loom. | Specialty Lines Insurance

As businesses increase their reliance on video platforms, continue to store more data in the cloud, and adopt remote and hybrid working models, the danger of cyberthreats looms larger.

“Cyber is one of the only risks that has the capacity to impact every company and industry,” said McMahon.

And while any industry size and type can be affected, businesses with fewer than 100 employees are currently experiencing 350 percent more attacks than larger companies.

“Historically it was the larger accounts in the crosshairs,” McMahon said. “But this year, we are seeing small- and medium-sized businesses suffer ransomware events more frequently than larger operations.”

Why? According to 2022 research by CNBC, small businesses are ill-prepared to handle cyberthreats. Less than half of small businesses have installed antivirus software or backed up their files externally, while only a third have implemented basic security measures like automatic software updates and two-factor authentication. Noted McMahon, “Without the proper digital ‘hygiene’ and contingency plans in place, organizations will increasingly place themselves in harm’s way.”

“Cyber is one of the only risks that has the capacity to impact every company and industry.”
-Kristin McMahon, senior vice president, Global Risk Solutions North America specialty claims for Liberty Mutual and Ironshore.

This doesn’t mean that larger organizations can be complacent. According to a 2021 Accenture survey of senior executives, the average number of cyberattacks experienced per company increased 31 percent compared to 2020.

“For larger companies, cyber hygiene is certainly critical. What’s also important is having the board of directors take an active role in protecting the business from cybercrime. Getting support from the top helps an organization prioritize cybersecurity and take active steps to stay on top of trends, conduct due diligence of third-party vendors, and more,” said McMahon.

2. A backlog of civil jury trials results in “rocket dockets”. | Specialty Lines Insurance

As businesses closed their doors to mitigate the spread of COVID-19, so, too, did the courts. While some innovations, such as holding trials in stadiums or over Zoom, allowed for the necessary social distancing, many cases were outright delayed. In Texas, for example, courts processed only 200 trials in 2020, compared to their normal 10,000 annual average.

Noted McMahon, “Since the return of in-person trials, the courts continue to navigate a significant case backlog. To get caught up, some judges are employing ‘rocket dockets,’ an approach that encourages plaintiffs and defendants to either settle or try their cases on an accelerated schedule.”

“Since the return of in-person trials, the courts continue to navigate a significant case backlog. To get caught up, some judges are employing ‘rocket dockets,’ an approach that encourages plaintiffs and defendants to either settle or try their cases on an accelerated schedule.”
-Kristin McMahon, senior vice president, Global Risk Solutions North America specialty claims for Liberty Mutual and Ironshore.

One side effect of this phenomenon: plaintiffs’ attorneys in some cases will settle in pretrial for a reasonable amount, opting to only try cases with juror appeal for which they could receive large jury awards.     

“It’s the older pre-COVID-19 cases accruing prejudgment interest where you have aggressive plaintiffs’ attorneys who believe in their high-damages cases — they’re going to hold out and try it to a jury,” McMahon said. 