to shareholders, the report notes. For
example, with recent environmental activism in the energy sector, shareholders
and regulators are targeting companies
and directors for purported failures
to accurately disclose climate-change-related risks to investors. Regardless of
the type of activism involved, the result
will likely be an increase in litigation and
regulatory activity globally.
5. New Labor chief
Andrew Puzder, CEO of CKE Holdings
(the parent company of Carl’s Jr. and
Hardee’s), was nominated to head the
U.S. Department of Labor (DOL). He
withdrew his nomination after losing
support in the senate.
Puzder has been an outspoken critic
on several federal employment initiatives, including the regulation expanding overtime protection, according to
public reports. The regulation was supposed to go into effect Dec. 1, 2016, but
was blocked on a nationwide basis by a
Texas federal district judge just days before its effective date. As many companies had already planned to take action
in preparation for its implementation,
this wait-and-see position creates a significant amount of uncertainty.
6. Mergers and acquisitions
Merger and acquisition (M&A) activity
— in the U.S. and abroad — is expected
to remain robust in 2017. Companies
will likely be eyeing smaller, more tactical M&A opportunities, the report predicts. This may fuel continued interest in
representations and warranties (R&W)
insurance to help facilitate the deal close
and differentiate a bidder’s proposal.
Additionally, issues with integration
can present an increased risk for shareholder claims if expectations are not met
and a stock drop reflects that.
7. Cyber insurance evolution
Cyber insurance was once thought of as
8. Excessive fee claims
a way to protect your company against
losing customers’ credit card, person-
ally identifiable and health information.
Organizations in 2017 are increasingly
considering the threat of business inter-
ruption as a result of a security breach.
Risk professionals will need to address
evolving cyber risks across multiple plat-
forms, as the business interruption may
be caused by both physical and non-
physical perils. As a result, organizations
will need to work with their insurance
advisors to bridge financial and profes-
sional and property insurance programs
to prevent potential gaps in coverage.
The report also predicts that big data
analytics will play a larger role in under-
writing. Cyber insurance has suffered
from a lack of statistically significant
actuarial data; however, insurers have
begun to explore alternative sources of
analytics to aid in their evaluation of an
applicant. As underwriters look to issues
of threat environment, resiliency, and
the general digital hygiene of the appli-
cant, they also look to the interconnec-
tivity of organizations and worry about
the possible aggregation of risk across
The trend is clear: Employee Retirement
Income Security Act (ERISA) fee litigation settlement amounts are rising. With
the increased pool of plaintiffs law firms
now focusing on excessive fee litigation
— some of which are advertising via
Facebook and LinkedIn in search of new
participants — the worrisome potential
exists for volume filings of claims with
the goal of getting a quick payout for the
plaintiffs and their law firms.
Given the large dollar amounts that
are held in 401(k) plans today, and the
recent successes of plaintiff firms, fee
cases remain sufficiently attractive for
plaintiffs’ lawyers to pursue.
9. Financial and technology
As most insurance professionals are
aware, financial and technology (Fin-
Tech) industries are converging at an
increasing pace. Traditional players in
both industries are looking at new reve-
nue opportunities and ways to improve
their current offerings and systems.
And new firms are emerging with in-
ventive and disruptive business models
designed to reshape the financial ser-
vices industry and meet changing con-
Although these shifts spark innovation, defensive positioning, and competition, they also have changed the risk
landscape for financial and technology
organizations. Moving into 2017, the
report predicts that financial companies
will increasingly see exposures that were
historically the domain of the technology industry; technology companies will
continue to move into highly regulated
areas that they may be unfamiliar with.
This has left financial regulators — including the Federal Deposit Insurance
Corporation, Federal Reserve, Office of
the Comptroller of the Currency, Consumer Financial Protection Bureau, and
state agencies — struggling to classify
new players whose risk profiles combine
the two sectors.
10. An interconnected world
It should come as no surprise to insurance professionals that global enforcement agencies are cooperating with
one another and pursuing what they
believe to be wrongful conduct around
the world. Often they are jointly sharing information and tactics in real time,
the report notes, which can lead to increased D&O and errors and omissions
(E&O) insurance claims as measured by
both frequency and severity.
One such tactic — referred to as “a
game changer” by the SEC — is rewarding whistleblowers. In what may be a
meaningful development, the Ontario
Securities Commission in Canada has
now opened its own Office of the Whis-tleblower capable of paying bounties of
up to $5 million, and Australia is considering doing so as well.