DACB_IMCT_Report_2015-16

Insurance
MarketConditions&Trends2015/16

DAC Beachcroft once again named Insurance
Team of the Year
Our insurance sector team was named Insurance Team of the
Year 2015 at the prestigious Legal Business awards in London
in March this year. This is the second time in the last three
years that the firm has claimed the coveted Insurance Team
of the Year title, having made the shortlist for the last four
consecutive years.
In 2001, the author Nassim Nicholas Taleb introduced the concept of ‘black-swan’ events
– unforeseeable and catastrophic incidents that cannot be predicted or avoided and have
a major impact on organisations. Examples include the September 11 attacks, the Indian
Ocean tsunami in 2004 and the recent Lufthansa/Germanwings crash where no one foresaw
the possibility of a pilot deliberately crashing a passenger plane.
By comparison, serious risks that companies can
identify and therefore are able to plan for are
known as ‘grey swan’ events. By focusing on the
grey swans, businesses can be better prepared
for the black, making them more resilient
when catastrophe strikes.
We have this year added a grey swan
watermark (as illustrated right) to identify
those predictions which have the potential
to develop into seriously disruptive events.

Contents
50 predictions
Making predictions about the future of the insurance market is not for the faint-
hearted. Our experts have boldly looked ahead at the challenges you may face over
the next year and produced 50 focused predictions.
3 Welcome
4 Sticking our neck out: last year’s predictions reviewed
How hard can it be to predict the future? Pretty tough amid the whirlwind of change
whipping around the insurance industry, so how did we do with last year’s predictions?
6
In-depth analysis
Fresh thinking on today’s big issues. Whether it is new perspectives on old
problems or perceptive insights into the new challenges of technologically driven
change, these four thought leadership pieces will stimulate discussion and debate.
26 Rising tide of cyber risks could swamp the market
Growing privacy and cyber liability in the UK will boost the cyber insurance market,
but liability insurers will need to examine their exposures if they are to avoid a flood
of unexpected claims.
24
8 Property
10 Construction Engineering
11 Marine, Aviation Transport / Energy
12 Directors’ Officers’ / Financial Institutions
13 Technology, Media Information Risk
14 Professional Liability
16 Product Liability Recall
17 Medical Malpractice
18 Insurance Advisory
20 Casualty
21 Motor
22 Reinsurance
23 Cross Sector Issues
1Insurance Market Conditions Trends 2015/16

42
Developments
In a world of breathtaking change, keeping abreast of legislative, judicial and
regulatory developments is essential for managing risk and business planning.
Our guide will ensure you have a concise summary of the key legal events from
the last 12 months at your fingertips.
44 Legislation
50 Cases
58 Other developments
61 Procedure
64 Acknowledgements further enquiries
65 Looking forward
30 Mergers and acquisitions: dangerous waters
Solvency II has made target valuation more complex and more critically important at a
crucial time in the MA cycle. The Prudential Regulation Authority has also raised the
stakes – not necessarily in the way you might think.
34 Tackling the threat of arson – whose problem is it anyway?
Industry leaders need to step up to the plate, show leadership and engage with a major
new arson-prevention initiative.
38 Cars, ships and planes – and not a driver, skipper or pilot in sight
A revolution is sweeping the world of transport, a revolution that will see people
and goods transported by road, sea and air without the assistance of human beings.
Fantasy? Generations away? Not according to a panel of experts at DAC Beachcroft.
2 www.dacbeachcroft.com

Welcome
David Pollitt
Head of Insurance
dpollitt@dacbeachcroft.com
Helen Faulkner
Partner and Head of Specialist Claims Services
hfaulkner@dacbeachcroft.com
As we turn into autumn, it is a good time to reflect on the year gone by
and consider what we might face in the next 12 months. In doing so, we
can plan for grey swan events and prepare ourselves as best we can for the
unforeseeable black swans.
This year we have started the report by reviewing how our experts fared
last year. You can see for yourself what we got right and what did not come
to pass (and why).
Your input is vital to our preparation of this report and this year some of
you received a survey request from us asking which of our 50 predictions
were top of your agenda. The results highlighted cyber and merger and
acquisition trends and you will see that these are issues we have now
elaborated on in our thought leadership pieces. If you would like to
become part of our client advisory forum, both influencing this report
going forward and sharing views on market trends and emerging issues,
please drop us an email.
I am also delighted to announce that from November this year Helen
Faulkner will take over from me as Head of Insurance, as I take on the role
of Managing Partner. Helen looks forward to her new role at the back of
this report.
Thank you for all your support, which enables us to continue to produce
this market-leading report.

A
ny firm bold enough to stick its collective neck
out and make 50 predictions about what might
influence the UK insurance market over the next
year is going to get some spot-on, some partially
right and fail to call it right with others. The unexpected
comes at us from all directions, but the aim of the predictions
section in this report every year is to focus on those areas
where the need to be ready to adjust to change, and meet
challenges head-on, seems most pressing.
What is a good strike rate? Perhaps that is for our clients and
readers to judge. Here’s a review of the big hits – and misses –
from last year’s report to help you make up your mind.
Stickingourneckout:last
year’spredictionsreviewed
Hitting the target
We have chosen ten predictions that have certainly attracted
interest over the last year and made a significant impact in
the market, sometimes even greater than we envisaged this
time last year.
Cat bonds take off. The catastrophe bond market continues
to grow with the first quarter of 2015 seeing a record US$1.7
billion of new bonds issued in a market now worth over
US$22 billion. Its size is now provoking some commentators
to question whether it poses a threat to the stability of the
reinsurance market, while others still herald cat bonds as a
stimulus to innovation.
Pensions – annuity market will contract. George
Osborne continued to surprise everyone with his extensive
liberalisation of the pensions and annuity market, a classic
grey swan event. The changes that were already weakening
insurers’ hold over the annuity market accelerated with the
new freedoms to drawdown lump sums from individual
pension funds.
Social media becomes more important. The use of social
media, especially by personal lines claimants, has continued
to develop and insurers are slowly coming to grips with the
opportunities for better interaction with customers. The
publication by the Financial Conduct Authority earlier this
year of new guidance on social media usage will give a fresh
impetus to this area.
Cyber – threat from breaches of commercial databases.
Hackers continue to pose a major threat to data-dependent
business and the legal consequences have grown too.
The delay to the new EU regulations has left a vacuum
for national courts to fill. The recognition by the courts
of liability for emotional distress alone caused by data
protection breaches has happened following the UK Court
of Appeal’s finding in Vidal Hall and others v Google Inc. This
is an area where black swans lurk in the shadows.
How hard can it be to predict the future? Pretty tough amid the whirlwind of change
whipping around the insurance industry, so how did we do with last year’s predictions?
Toptenpredictionsfrom2014
• Cat bonds take off
• Pensions – annuity market will contract
• Social media becomes more important
• Cyber – threat from breaches of commercial
databases
• HMRC tax avoidance clampdown
• London Market merger and acquisition
activity
• Insurance Linked Securities market emerges
for captives
• Abuse claims – sensitive and costly
• Claimant solicitors look outside portal
• Technology will grow in motor market

the motor claims supply chain. The feared potential for
conflict over data ownership is growing.
Predictions that did not happen
There are a few of last year’s predictions – on medical
devices and data protection regulation in particular – that
have got stuck in the European policymaking machine.
The European Union’s iterative policymaking process always
moves slowly but even experienced observers can be caught
out from time to time by the snail’s pace progress.
The medical devices regulations, prompted after scandals
involving PIP breast implants and prosthetic hips, surprisingly
failed to get past the Council of Ministers in December, while
intense lobbying by privacy campaigners on one side and
internet firms on the other has slowed down the progress of
the revised data protection rules.
A key challenge was that some of the crucial European
Parliament committees took longer than expected to be
reconstituted after last year’s European Parliament elections.
These saw a much enlarged block of anti-EU MEPs elected
from across Europe, many of whom have no appetite for the
legislative heavy-lifting in the committees.
These key issues will emerge from the extended EU policy
formation process at some stage in the next 18 months so
they haven’t gone away and will need to be watched carefully.
Then there was the completely unexpected – the shock 56%
increase in Insurance Premium Tax in George Osborne’s post-
election budget. The new 9.5% rate hits in November and will
put the personal lines market, in particular, under fresh pressure,
as consumers will expect insurers to absorb the increase. A
genuine grey swan event, but one that no-one predicted.
So, several hits, a few misses but, most importantly, plenty of
food for thought.
HM Revenue Customs (HMRC) tax avoidance
clampdown. The high profile this issue has had on the
political agenda has ensured that the momentum behind
HMRC’s tough stance against anything that looks like
avoidance has continued. This is very unlikely to relent.
London Market merger and acquisition (MA) activity.
Last year saw the start of what has become a boom in
MA activity, fuelled by the diverse factors we identified
last year – Solvency II, the search for value in a soft market
faced with low investment returns and the pursuit of
business in high-growth markets.
Insurance Linked Securities market likely to emerge for
captives. This is still a hot topic among corporate financiers
and risk managers even though the market is yet to develop.
Pooled risks and club deals may be the way forward.
Abuse claims – sensitive and costly. Warnings that the
volume and profile of abuse claims would continue to pose
a growing challenge, especially as claimant solicitors can
recover high costs, proved to be chillingly accurate. Recent
new cases thrown into the public spotlight show this
sensitive issue will not go away.
Claimant solicitors look outside the portal. The exodus
is gathering pace and to a greater extent than even the
pessimists feared, with some firms almost giving up on
claims that fall within the portal, although volumes within
the portal remain as high as ever. The wave of personal
injury firms entering markets such as deafness and clinical
negligence claims will continue – watch out for possible
new areas not yet tapped.
Technology will grow in the motor market. Telematics
is starting to go mainstream and the proportion of new
cars with automated emergency braking, lane drift sensors
and other safety devices is now significant enough to start
having an impact on accident rates, with implications for
Severalhits,afewmisses
but,mostimportantly,plenty
offoodforthought.

Making predictions about the
future of the insurance market
is not for the faint-hearted. Our
experts have boldly looked ahead
at the challenges you may face
over the next year and produced
50 focused predictions.
50 predictions

Property
Take great care over Insurance Act
implementation
Insurers applying the Insurance Act 2015 before it comes
into effect in August 2016 must ensure that they consider
all the implications in advance.
Proportionate remedies (as opposed to avoiding a policy
from inception) could be seen as confirming policy cover
unless claims handlers are clear about settlement terms
being proposed on a voluntarily more generous basis.
Consideration also needs to be given to the position of any
following market (and reinsurers) if non-standard terms
are applied. Arguably any payments made over and above
strict contractual obligations or entitlements could be seen
as ex gratia.
Unqualified statements such as “We apply the terms of
the new Act to all our customers immediately” will have
very wide ramifications, for example on long-tail business,
unless it is also clearly stated that the interim provisions
only apply to policies incepting after a certain date.
Liability policies, both where there is early implementation
and also after August 2016, also require consideration
about the practical implementation of proportionate
payments on third party claims and own adviser costs and
how instructions and claims control may be affected.
The internet of things will reshape
property insurance
The ability of objects to interact with each other through
the internet – known as the ‘internet of things’ – has the
potential to affect every stage of the insurance cycle, from
risk assessment to the management of hazards and claims
handling. Accurate data will allow more tailored cover and
premiums. Automated offices and homes will be able to
generate real-time data and alerts, avoiding or reducing
the severity of claims and providing clarity for remedial
works. Automatic notification and assessment will also
cut processing times. Such technological developments,
however, require insurers to be aware of increased risks,
including those around data protection and cyber attacks
causing property damage.
Industry to lead the fight against arson
Arson prevention will become a major theme
for the insurance industry as opportunities emerge
to collaborate and significantly reduce the impact of
deliberate fires. Following the Arson Prevention Forum’s
Call to Action report in 2014, arson is now attracting the
attention of government and all emergency services. The
insurance industry will need to take a lead role – in much
the same way as it did with the fight against insurance fraud
– fostering far greater collaboration with stakeholders and
increasing its investment in loss prevention.
Theinsuranceindustrywillneedtotakealead
roleinthefightagainstarson,fosteringfargreater
collaborationwithstakeholdersandincreasingits
investmentinlossprevention.
Nick Young
Partner
nyoung@dacbeachcroft.com

Sanctions could be a trap for the unwary
Political risk will remain high throughout 2015 and
into 2016 with the extension of European and American
sanctions setting new challenges for insurers and brokers.
Tougher action against terrorist groups and against Russia
for its annexation of Crimea and involvement in the war in
Ukraine is increasingly affecting a wider range of commercial
contracts, including insurance. Russia in particular will add
unique sovereign debt and currency risks to the global
picture, so insurers with exposures to global contracts or trade
related cover will have to take an ever-more vigilant role when
apportioning premiums, and when selecting and reviewing
coverage. Sanctions may also affect investment in insurers as
regulators focus on corporate controllers.
Difficult decisions needed over the Riot
Compensation Bill
Much remains to be debated over the Riot Compensation
Bill and it is unclear at this stage which way the decisions will
fall. Whatever the shape of the final legislation, insurers will
need to consider the extent of the cover they are prepared to
grant and how the two will dovetail. The inability to recover
consequential losses foreshadowed in the Bill is going to be
a key concern for both insurers and insureds. Although the
turnover cap has been removed as overly restrictive, the
compensation cap still remains at £1 million.
Key developments in 2014/15
• Insurance Act 2015
• Riot Compensation Bill
• Third Parties (Rights Against Insurers) Act 2010
• Versloot Dredging BV and another v HDI Gerling and others
• Flood Re
In-depth analysis Developments50 predictions

Construction Engineering
Infrastructure gets major government boost
The next decade will test the capacity of the insurance
market – as investors and insurers – to support a series of
major infrastructure projects. Infrastructure investment is seen
by the government as one of the keys to economic growth
and regional policy – HS2, airport expansion, new town
developments and flood defences are all on the Chancellor’s
shopping list, with large scale energy production projects likely
to follow. The government is expecting the insurance market
to provide upwards of £25 billion to support these projects as
well as provide a wide range of cover during the construction
phases. It will also look to the insurance industry to make a
significant contribution on the health and safety front as it did
during the fatality-free 2012 Olympics construction period.
Integrated Project Insurance will require a
quantum shift
A quantum industry shift will be required to progress the
government’s Integrated Project Insurance initiative. It may
seem utopian to imagine a construction industry with one
collective co-operative partnering goal of timely project
completion, on-budget and without a cross word. No blame,
just solutions when things go wrong. The usual insurance lines
would be housed in a single policy addressing any project loss,
in a reward structure only promoting positive contributions.
Certainly, it seems a far cry from the current reality where
project parties readily reach for their statutory adjudication
rights. This initiative will need to be driven by public
procurement and the desire of the construction insurance
industry to explore the reinvention of its value.
David Bear
Partner
dbear@dacbeachcroft.com
Strongtechnicalclaimshandlingwillbekey
tomaintainingmargins,asthesoftinsurance
marketcontinuestoinhibitpremiumgrowth.
Claims co-operation or claims intervention?
Mixed messages in international project
reinsurance
We will see a separation in the leading reinsurer approaches,
between those who will accept claims co-operation terms to
build project premium and those holding on to claims control
to protect slim margins. Mixed messages currently resonate
in the market. Insurgent surplus capital coupled with cedant
retention has apparently delivered a proliferation of claims
co-operation terms – conferring sympathetically led local
resolution of losses. However, senior broking practitioners have
recently expressed concerns that reinsurers are now taking a
tougher line and leading more coverage disputes based on
claims control.
Push the recovery door as it is still open
Strong technical claims handling will be key to
maintaining margins, as the soft insurance market continues
to inhibit premium growth. Underwriters often shy away from
coverage defences. In that context, recovery is all the more
important. The judicial tone in 2015 in Gard Marine and Energy
Ltd v China National Chartering Co Ltd may seem against
project recoveries. Not so. The law remains that a joint names
policy must be construed in the context of the underlying
contractual matrix. Significant numbers of main contractors
still choose to place Contractors All Risks and indemnity
obligations on the shoulders of their subcontractors. There is
no substitute for looking at the contract terms.
• Construction (Design and Management) Regulations 2015
• Aspen Insurance UK Ltd v Adana Construction Ltd
• Gard Marine and Energy Ltd v China National Chartering Co Ltd
• Rendlesham Estates Plc and others v Barr Ltd
• Building Information Modelling

Marine, Aviation Transport / Energy
Disputes over territorial waters will
increase disruption to shipping
Growing geopolitical tensions and disputes over territorial
waters are causing increased disruption to shipping, which
naturally has a knock-on effect on the marine insurance
markets. Transit chokepoints are a particular concern, with
the recent events in Yemen and Iran’s actions in the Strait of
Hormuz highlighting the fragile state of some regions.
Looking forward, how might further instability in the Middle
East (in part due to the activity of the Islamic State group),
China’s ‘nine-dash line’ and increasing claims over the major
part of the South China Sea, and Russia’s unclear intentions
in the Baltic/Crimea regions and beyond, impact shipping in
the coming years? Insurers need to be alive to such possible
developments and the associated risks.
Insurers need to review provisions on
reimbursing ransom payments
Providers of kidnap and ransom insurance will need to
review their provisions on reimbursing ransom payments in
light of the Counter-Terrorism and Security Act 2015. The
existing Terrorism Act 2000 makes it an offence to enter
into an arrangement which will result in money or property
being made available to another whom the insurer knows
or has reasonable cause to suspect will or may use it for the
purposes of terrorism. The new insurer-specific provision
includes payments in respect of money that has been
handed over, meaning that reimbursing a ransom payment,
as well as providing the funds to make it, is now an offence.
Mixed fortunes as a result of falling oil
prices
Oil prices have fallen by around 50% since June 2014,
having a mixed impact on the marine and offshore energy
industries. Lower oil prices have sharply reduced the cost
of shipping, where fuel can account for 60% or more of
the total operating costs of transporting freight by sea.
There is also a demand for floating storage units to hold
oil until prices rise. Insurers of such vessels and cargo need
to consider where they will be located and whether this
increases weather, piracy and terrorism risks. Depressed oil
prices will, however, have a negative impact on offshore
energy. The significant reduction in capital expenditure by
the oil majors last year is now being felt across the industry,
raising concerns as to whether cutting corners and aged
assets could lead to increased claims.

Anthony Menzies
Partner
amenzies@dacbeachcroft.com
Providersofkidnapandransominsurance
willneedtoreviewtheirprovisionson
reimbursingransompaymentsinlightofthe
Counter-TerrorismandSecurityAct2015.
• Counter-Terrorism and Security Act 2015
• Gard Marine and Energy Ltd v China National Chartering
Co Ltd
• Versloot Dredging BV and another v HDI Gerling and others

Directors’ Officers’ / Financial Institutions
Class actions may be coming to the UK
US-style class actions have not yet reached Europe,
although steps are being taken to make it easier to bring
collective actions in several member states. Barriers to group
litigation are also gradually being eroded in the UK. Examples
include the Consumer Rights Act 2015, which introduces
opt-out class actions for the first time, and the £4 billion
shareholders group action against RBS’s former directors, issued
in April 2013. Both of these types of collective proceedings are
currently limited to certain causes of action but they may be
indicative of wider changes to the UK litigation landscape. This
could have significant implications for directors’ officers’ and
financial institutions markets.
Claims are more likely in the wake of
deferred prosecution agreements
The introduction of deferred prosecution agreements (DPAs)
will increase the risk of claims against directors and officers
in the UK. The increased risk arises from the likelihood that,
after a DPA has been entered into by the entity, individual
prosecutions will follow. Standard directors’ and officers’ (DO)
wordings will respond to the defence costs and expenses related
to such prosecutions but questions will arise as to whether a
circumstance notification can or should have been made once a
DPA was under negotiation or approved by the court.
In the US, plea bargains have encouraged prosecutors to bring
cases in the expectation that, with the right pressure, even
hard cases can produce a win for prosecutors. The Serious
Fraud Office (SFO) has now issued its first invitation letters
giving firms the opportunity to enter into DPA negotiations
and it is currently working with those firms. Therefore, we
predict more cases will be brought and a consequent increase
in notifications to DO policies, provided the SFO is given
sufficient resources to pursue cases, which has been an issue
for it in recent years.
Whistleblowing and associated policy issues
on the up
The UK authorities are actively encouraging a culture of
self-reporting and whistleblowing. The costs of internal
investigations could be significant and may not currently be
covered under directors’ and officers’ (DO) policies. Typically
only the costs of a formal or official investigation attract
cover. Increases in regulatory claims are also likely to follow
suit. Whether an admission of misconduct in a whistleblower
report or a settlement with the regulator could trigger an
exclusion under a DO policy will depend on the specific
policy wording, the process surrounding the admission and
how it is phrased. Insurers and insureds may wish to revisit
wordings to ensure the correct level of cover is provided.
2015/16mayseeahardeningmarketforDO
The Petrobras scandal seems to grow in magnitude
with every passing day and across the globe the outlook is
for an increasingly regulated business environment. Recent
years have seen a perfect storm in the area of directors’
and officers’/financial institutions liability: the forex, LIBOR
and payment protection insurance scandals, as well as an
increase in enforcement activity, all of which have driven
increased demand for cover. However, this has not translated
into a hardening of rates to date, and broad cover and
overcapacity have been a part of underwriters’ reality. As
the economic recovery gathers pace and capital finds better
returns elsewhere, perhaps a reduction in capacity will bring a
hardening market.
William Allison
Partner
wallison@dacbeachcroft.com
Thishasnottranslatedintoa
hardeningofratestodate,andbroad
coverandovercapacityhavebeenapart
ofunderwriters’reality.
• Consumer Rights Act 2015
• Small Business, Enterprise and Employment Act 2015
• Jetivia SA and another v Bilta (UK) Ltd and others
• R (on the application of Bluefin Insurance Services Ltd) v FOS
•SPLPrivateFinanceICLtdandothersvArchFinancialProductsLLP

Technology, Media Information Risk
Evolving data protection law could boost
cyber policies
Data breaches are set to become more costly. The proposed
new European Data Protection Regulation is expected to
bring mandatory breach notification requirements. Before
then, regulators and the courts are increasingly looking
to companies to take action to protect or compensate
individuals who suffer the misuse or loss of their personal
data. This could well prove a boon for standalone cyber
insurance policies, reinforcing the need for this emerging
class of insurance, but insurers of other classes also need to
review their existing policies as to how they might respond
to a potential flood of claims for data breaches and privacy
infringements against their policyholders.
This is the year for big media and IP
decisions
The next year is likely, finally, to see some cases under the
Defamation Act 2013. How should the ‘seriousness threshold’
be applied? How far does the ‘public interest’ defence go?
These may well be questions the courts are asked to address.
Within the intellectual property world, brands seem to be
more ready to protect their trademarks and copyright, with
the Intellectual Property Enterprise Court in London going
from strength to strength. The big theme for the future
remains finding a coherent and efficient way of cross-border
enforcement, but that is still some way off.
Wearable devices herald fresh liabilities
for insurers
Wearable devices, with their ability to record almost
every aspect of our waking and sleeping lives, will bring
with them a host of previously unconsidered liability
scenarios for insurers to think about. For example,
employees will be able to record audio and video
of colleagues; devices will distract motorists; privacy
liabilities associated with data recorded by the device
will require consideration, as will intellectual property
breaches as a result of recording commercial events. The
launch of the Apple Watch in 2015 has finally brought
this latest innovation to the mainstream consumer. If
previous Apple devices are a sign of things to come, our
initial scepticism will soon be replaced with a question
as to how we ever lived without our wearable devices or
doubted the prospect of these potential liabilities.
Hans Allnutt
Partner
hallnutt@dacbeachcroft.com
Ourinitialscepticismwillsoonbe
replacedwithaquestionastohowwe
everlivedwithoutourwearabledevices
ordoubtedtheprospectofthese
potentialliabilities.
• EU Data Protection Regulation
• Network and Information Security Directive
• Serious Crime Act 2015
• Vidal-Hall and others v Google Inc

Insurers pay the bill for arson, so it makes perfect sense
for them to talk to those fighting deliberate fires and
prosecuting perpetrators, but there needs to be far
greater engagement by individual insurers and the
ABI on arson if this is to happen. The key will be re-
establishing arson as an important topic at the C-suite
level and focusing on the huge potential there is for
reducing costs by tackling arson.
Spirit of co-operation
Currently there is no formal network linking the
emergency services – they fall under different
government departments – which makes a co-ordinated
response to arson challenging. However, in the current
political and economic environment, government
agencies are being encouraged to seek efficiencies and
share services. This is already happening in some cities
and counties with police and fire services, and the
current government is likely to encourage this further as
the downward pressure on public spending increases.
If the emergency services are successfully integrated,
and potentially brought under a single government
department, this would open up an opportunity finally
to achieve closer cross-agency co-operation on arson.
This would have tangible benefits for combatting arson.
The ABI is keen to collaborate in order to reduce arson
and notes that insurers already play a vital role in loss
prevention. “Arson has for many years been a high-
profile concern and we recognise the need to tackle
the needless damage and disruption that deliberate
fires can cause to homes and businesses,” says Mark
Shepherd, ABI Manager for General Insurance. “We work
closely with the Arson Prevention Forum, including
contributing to their Call to Action report, and we
welcome any collaborative work that could help to
reduce the number of arson cases.”
The insurance industry produces a wealth of research,
guidance and advice to help prevent arson in a range
of sectors, according to the ABI. “The industry plays a
leading role to help their customers manage their arson
Ifwedonothing,thecostofarsonwillcontinuetoclimb
atatimewhenmoneyistightforthepublicsectorandthe
insuranceindustry.
problem, it would appear, largely comes down to
a lack of both leadership and ownership – whose
problem is it anyway? The government expects
the insurance industry, which would benefit from
any reduction in claims, to take a lead. Individual
insurers have not made arson a priority and, until
they do, the ABI is unlikely to swing into action.
“I have been surprised that arson is not a
bigger issue for the insurance industry,” says
Howell. “The cost of arson is significant so why
wouldn’t insurers want to take action? Some
insurers – notably AXA and Zurich Insurance
– are proactive in this area and are engaging
with the APF.
“But we need the engagement of senior
management, which should bring about a much
needed industry response led by the ABI.”
In much the same way as they did with insurance
fraud, the insurance industry could take a leading
role in helping society deal with arson, supporting
research and behavioural and psychological
profiling of the perpetrators of arson.
Fraud and arson
There are many links between insurance fraud and arson,
according to David Hertzell, a former Law Commissioner
who now leads the government’s taskforce to consider
insurance fraud. “Fraud does not respect boundaries,” he
says, noting that fraud, whether it is in the form of arson,
insurance fraud or benefit fraud, is socially corrosive and
adds to the cost of living.
“The taskforce has been given an open remit and while
personal injury, and whiplash claims in particular have
been the main cause of concern, arson also has its place.
We are conscious that personal injury fraud should not
dominate the work of the taskforce. The Insurance Fraud
Taskforce welcomes input on arson and it is the intention
to include arson in my final report.”

worth over £1.23 billion this year. We are already seeing
numerous block notifications from accountants and
financial advisers in particular, although other professions
can also be affected. This trend can be expected to
continue and to increase.
Scams and cyber breaches will hit
lawyers and their insurers
So-called ‘Friday afternoon’ scams and email hacking
frauds are the latest threat to lawyers and their insurers.
According to the regulator, one law firm a week is
reporting such attempts to gain access to its client
accounts. This is starting to have a serious impact in the
market and is likely to affect insurers’ views on risk profile
and premium. These issues will continue to come into
sharper focus as the majority of lawyers start to renew
their policies and underwriters begin to ask questions
about their risk management policies. Underwriters
will also be asking some fundamental questions about
whether the Minimum Terms and Conditions should
respond to this emerging risk.
• Construction (Design and Management) Regulations 2015
• AIB Group (UK) Plc v Mark Redler Co Solicitors
• Toombs v Bridging Loans Ltd
• Building Information Modelling
• Procedure

3D printing will multiply product
liability issues
The emergence of 3D printing has been described
as paving the way for a third industrial revolution
and insurers need to assess carefully the risks posed
throughout the supply chain for these extraordinary new
products. Toys, shoes, medical devices, cars, houses and
even human tissue have all been built using 3D printing.
Liability for 3D printed products can potentially lie with
one or more of several parties, including the designer of
the original product, the software designer, the supplier of
the raw material for the 3D printer, the manufacturer of
the 3D printer, the company printing the 3D product or
the distributor.
Focus will be on traceability for product
recalls
Manufacturers and distributors who do not know their
supply chain partners (and who do not keep records of
where they source from and supply to) face more claims
and risk regulatory action. EU product safety reforms
will focus on improved traceability along the supply
chain. In the UK, the effectiveness of product recalls will
also be under the spotlight of the Faulds Wood review,
set up by the government to address the low success
rates of many safety recalls. Knowing the supply chain
is key to an effective product recall and any legislative
proposals are likely to focus on this.
Product Liability Recall
Wendy Hopkins
Partner
whopkins@dacbeachcroft.com
Knowingthesupplychainiskey
toaneffectiveproductrecallandany
legislativeproposalsarelikelyto
focusonthis.
E-cigarettes regulation will clear the air
E-cigarettes could soon be a more certain risk for
insurers. From 2016, the Medicines and Healthcare
Products Regulatory Agency will regulate as medical
products e-cigarettes containing more than 20 milligrams
per millilitre of nicotine. It remains to be seen whether
regulatory approval will be a selling point as e-cigarette
manufacturers emphasise that their products are different
from traditional tobacco. Insurers will want to be clear
that the product is safe and to insist that all regulatory
requirements are followed as a condition of cover. The
scientific debate as to whether e-cigarettes pose long-term
health risks is likely to continue for some time. Separately,
investigations into property fires will no doubt raise the issue
of the safety and compatibility of chargers.
• Brussels Regulation Recast
• General Product Safety Directive
• Boston Scientific Medizintechnik GmbH v AOK
Sachsen-Anhalt
• Faulds Wood heads review of UK product recall system

Insurance Advisory
The London Market needs true
innovation, not just repackaging and
marginal gains
London will begin to understand that its real advantage
in the global insurance market is underwriting expertise
and experience, not proximity to capital, which is now
genuinely global. Competing for a share of the established
cat bond market or repackaging existing capacity in
consortia will not take the fight to Bermuda or establish
London insurers in the high-growth markets of Asia and
Latin America. We wait to see which London players
will bring game-changing innovation to the market this
year. Three things we’d like to see are Insurance Linked
Securities for new types of risk, insurance solutions for
Basel III capital requirements and cover for fractional
ownership in the sharing economy.
New Data Protection Regulation will
creep into UK law in advance of
implementation
Although the new EU-wide Data Protection Regulation
is not expected to be in force until January 2018 at the
earliest, we have seen much of its predicted content
implemented by the back door in the UK through the
courts and guidance from the Information Commissioner’s
Office. We expect this trend to continue into 2016.
Insurance companies should be implementing policies,
procedures and new initiatives (such as big data analytics)
now, not only to be ready for the go-live in 2018 but to
meet current expectations and guidance.
Complexfinancialstructureswillfind
favourunderSolvencyII,despite
regulators’desireforsimplicityand
transparency
Insurers will need to reinvent their investment strategies in
the search for optimal capital treatment under Solvency
II. With funds and investments packaged as funds under
the microscope of Article 84 ‘look-through’ valuation
and securitisation subject to asymmetric capital loading,
the need for investment return will push complexity
to the portfolio level. The life market will make use of
the matching adjustment rules to create segmented
portfolios, but the general market will need to think
about investment return more widely than it has before.
As always, hedge funds and investment managers seeking
insurance clients will treat the new prudential regulations
as design parameters.
Adrian Williams
Partner
adwilliams@dacbeachcroft.com
Competingforashareoftheestablishedcatbond
marketorrepackagingexistingcapacityinconsortia
willnottakethefighttoBermudaorestablish
Londoninsurersinthehigh-growthmarkets.

The Senior Insurance Managers Regime
will cause upheaval
Many UK insurers will face upheaval over the next
few months preparing for the new Senior Insurance
Managers Regime (SIMR) and reformed Approved
Persons Regime, which come into effect on 7 March
2016 (although some elements start on 1 January 2016).
Some grandfathering will be permitted but insurers will
need to identify which individuals will perform which
functions under the new rules and to ensure they are
aware of what will be required of them. The SIMR will
implement Solvency II requirements as well as applying
some aspects of the senior managers regime for banks to
insurers subject to Solvency II. The key features include
a requirement to produce and maintain a governance
map, a wider requirement to identify those performing
‘key functions’, a new conduct standard and a Group
Entity Senior Insurance Manager function, potentially
catching senior people in parent companies. Many might
question the need for such ‘platinum plating’ of European
insurance regulation, which will inevitably affect the
UK’s competitive position, when conventional insurance
contributed so little to the financial crash of 2008.
• Insurance Distribution Directive
• Markets in Financial Instruments Directive II
• FCA General Insurance Add-Ons Consultation Paper
• FCA thematic review of delegated authority foreshadows
shake-up of outsourcing in general insurance market
• Financial Services (Banking Reform) Act 2013 update

Casualty
Social benefit of activities will become an
important consideration
Following implementation of the Social Action,
Responsibility and Heroism Act 2015, the social benefit of
activities will become more important as courts are bound
to consider the question when deciding whether to award
damages in claims for negligence and breach of statutory
duty. Following the reports of Lord Young and Professor
Löfstedt, the Act is intended to encourage activities which,
recently, have been discouraged by the threat of litigation.
Portal process tactics will test insurers’
mettle
Insurers and their solicitors will need to be on their guard
against tactics to play the portal process. The horizontal
extension of the low value protocols into employers’ liability
and public liability and the extension of portal fixed costs
have seen claimant solicitors adopt obstructive tactics,
refusing to take telephone calls and giving the minimum
information in their Claim Notification Forms, in a bid
to force claims to drop out of the portal process. The
introduction of fixed recoverable costs for claims falling from
the portal process has also seen firms trying to avoid the
portal by adding defendants to disease claims, exploiting
loopholes and valuing claims over the portal’s ceiling on
notification. Others have notified claims within the portal
only to reveal that they are catastrophic injury claims once
an admission of liability has been obtained.
Mesothelioma claims should decline in
volume but costs might rise
The number of deaths each year from the asbestos-
induced cancer mesothelioma is expected to peak over
the next five years. From 2020, the number of claims
presented each year is expected to decrease, albeit
insurers are now required to contribute a levy – £32
million for the first year – towards the compensation
scheme for claims where no solvent paymaster is traced,
set up under the Mesothelioma Act 2014. The unknown
factors insurers need to monitor are the split between
traced and untraced claims – which is moving in favour
of the former under the scheme set up by the industry
– and the impact of the pre-election announcement
by the Department for Work and Pensions that the
untraced claims compensation scheme payouts will
be raised from 80% of the current court settlements to
100%. This may push up the levy.
Courts will take hard line on dishonesty
The implementation of section 57 of the Criminal
Justice and Courts Act 2015 should enable insurers to
persuade the courts to strike out not only fraudulent
claims but also exaggerated claims and genuine claims
where the claimant supports the fraudulent claim of
a co-claimant. Following the judgments in Gosling v
Hailo and Screwfix Direct and Zimi v London Central Bus
Company Limited, the Act gives the court the power
both to disapply the costs protection of qualified one-
way costs shifting and to strike out the entire claim.
Tom Baker
Partner
tbaker@dacbeachcroft.com
Insurersandtheirsolicitorswill
needtobeontheirguardagainst
tacticstoplaytheportalprocess.
• Criminal Justice and Courts Act 2015
• Social Action, Responsibility and Heroism Act 2015
• Mohamud v WM Morrison Supermarkets Plc
• Zurich Insurance Plc UK Branch v International Energy
Group Ltd
• ABI guidelines on the instruction of private investigators

Motor
Autonomouscarswillheraldachangeofgear
inassessmentofriskinmotorclaims
With driverless car pilots now under way, risk will need to be
assessed differently, with greater emphasis on the vehicle. Fully
autonomous cars will help to reduce significantly the frequency
and severity of accidents as the potential for human error is
removed. But, like all technology, it will sometimes fail. When
it does, it might be the product liability insurer of the vehicle
or system manufacturer receiving the claim, not the motor
insurer. Collaboration between insurers and vehicle and system
manufacturers is also likely to grow as the vast amounts of
data the car will be processing will be valuable to both claims
and underwriting teams. Associated cyber risks should not be
underestimated, from rerouting multiple vehicles and causing
traffic chaos to using the vehicle as a weapon.
Government reforms will promote
independence and quality in whiplash
reporting
The government’s whiplash reform programme is yet to be fully
implemented but there is cause for optimism that it will help
restore confidence in medical reporting. The reforms regulate
those who can prepare the report and their fees, and prevent
solicitors from instructing medical reporting organisations or
experts with whom they have a direct financial link. This goes
some way to promoting independence in reporting. However,
to weed out unmeritorious claims on a mass scale and improve
quality in reporting, the system of accreditation (due to be
implemented on 1 January 2016) will need to use management
information to identify persistent non-compliance and/or
underperformance and impose robust sanctions, and MedCo
must be prepared to show its teeth where necessary.
Clampdown needed on fraud when
applying for insurance
The Insurance Fraud Taskforce must now find ways to
educate consumers that insurance fraud is not a victimless
crime. Set up by HM Treasury to investigate the causes
of insurance fraud and to recommend solutions for
implementation, the Taskforce’s interim report has already
identified as a key issue a perception among some that it
is acceptable to misrepresent facts at the point of quote.
It is only when insurance fraud is viewed in a similar vein
to benefit fraud that peer pressure will help to alleviate
the problem and thereby protect the interests of honest
consumers and lower claims.
Credit hire rate review may see insurers
exit the GTA
The Association of British Insurers’ General Terms of
Agreement (GTA) annual rate review may see some existing
subscribers exit the industry agreement unless the rate
changes reflect the current state of the law and the market.
In the recent Court of Appeal decision in Stevens v Equity
Syndicate Management Ltd it was held that the rate awarded
to a non-impecunious claimant should be the “lowest
reasonable rate quoted by a mainstream supplier”. While
traditionally there has been a small increase in GTA rates each
year, following this decision there is pressure for the rates to
go down.
Peter Allchorne
Partner
pallchorne@dacbeachcroft.com
Itisonlywheninsurancefraudis
viewedinasimilarveintobenefitfraud
thatpeerpressurewillhelptoalleviate
theproblemandtherebyprotectthe
interestsofhonestconsumers.
• Criminal Justice and Courts Act 2015
• Deregulation Act 2015
• Delaney v Secretary of State for Transport and Vnuk v
Zavarovalnica Triglav
• Stevens v Equity Syndicate Management Ltd
• MyLicence

Reinsurance
Concentration of risks in mega cities
could create a perfect storm
With the rise of mega cities, reinsurers need to monitor
and manage any high concentration of risk. Exposures
include natural hazards, in particular earthquake, flood
and windstorm; technology and infrastructure failures;
financial risks from systemically important markets or
entities; and social and political risks such as terrorism, war
and epidemics. McKinsey recently predicted that by 2025
China will have 221 cities with over one million inhabitants
and an urban population of one billion. With western
insurance markets saturated and soft markets being the
new normal, insurers are seeking greater penetration into
emerging markets, including China. Reinsurers need to be
wary that they may be heading for a perfect storm.
Reinsurers to challenge whether
settlements are proper and businesslike
The scope and meaning of follow the settlements
provisions and all their variants will continue to cause
uncertainty for reinsurers. The market had been hoping
the appeal in Tokio Marine Europe Insurance Ltd v Novae
Corporate Underwriting Ltd – the Thai floods cases
involving substantial losses for Tesco’s local operations
– would clarify these controversial clauses. However,
the parties reached a compromise leaving the original
decision to stand. This said that the reinsured need
only show that a loss was ‘arguably’ covered to trigger
the follow the settlements clause. The argument that it
had to be demonstrated on the more onerous balance
of probabilities test was rejected. Reinsurers will still
be able to argue that the settlement is not proper and
businesslike – the further requirement under a follow the
settlements clause. However, such challenges are only ever
likely to succeed if it can be shown that a materially better
settlement could have been achieved had different steps
been taken to determine the settled claim.
Life reassurance approaches will cross
over into non-life markets
Reinsurance carriers will need to devise complex structures
aimed at risk management and balance sheet protection.
This will see increasing crossover from the life reinsurance
market where using reinsurance as a means of recouping
payment of acquisition expenses secured against a flow of
premiums is now an established tool. Wide-ranging
opportunities are likely to present themselves, from
re-engineering existing treaties and reviewing aggregate
excess of loss contracts with substantial values to
incorporating novel approaches to risk management.
Restructuring mechanisms, such as transfers of blocks of
business made under Part VII of the Financial Services and
Markets Act 2000, are also likely to feature more frequently.
Julian Miller
Partner
jmiller@dacbeachcroft.com
Withtheriseofmegacities,reinsurers
needtomonitorandmanageanyhigh
concentrationofrisk.
• Riot Compensation Bill
• Tokio Marine Europe Insurance Ltd v Novae Corporate
Underwriting Ltd
• Zurich Insurance Plc UK Branch v International Energy
Group Ltd

Cross Sector Issues
and Inclusion@Lloyd’s in encouraging all firms in the insurance
market to address the lack of diversity at all levels. Our own
Diversity and Inclusion programme is currently taking a deeper
look at how our people think, feel and act, with plans also to
capture the views and ideas of our clients.
Commercial claims handling faces increased
scrutiny
Insurers in the small and medium-sized enterprise (SME)
market could find themselves asked by the Financial Conduct
Authority (FCA) to carry out internal reviews to determine
whether individual instances of poor claims handling reflect
widespread issues within the firm. This follows a thematic
review into claims handling in the SME market in which the
FCA assessed 25 firms including five insurers, ten intermediaries
(including five managing general agents) and ten loss assessing
firms, focusing on claims of more than £5,000. The FCA found
that the claims service was not consistently working in the
interests of many businesses. Among the examples of poor
practice were delays in initial visits by loss adjusters, a lack of
clarity over which party was responsible for driving claims
outcomes, and claimants feeling unclear about how they could
minimise disruption to their businesses.
FCA gives green light for social media lift-off
The use of social media by the insurance industry
will continue to expand rapidly following the publication of
helpful guidance by the Financial Conduct Authority (FCA)
in March. Firms will feel more confident in using a wide range
of social media platforms to communicate and engage with
their customers. The use of social media will also become
more sophisticated as firms gain a better understanding of
how customers use it and which platforms they prefer. This
phenomenon will increasingly cover customer communication
in both personal and commercial lines.
European battles loom following election
The unexpected election of a Conservative
government with an overall majority has thrust the
renegotiation of the UK’s terms of membership of the EU to
the top of the political agenda. It is now certain that there
will be an in/out referendum before the end of 2017. This
debate will be watched keenly by the insurance market with
major players such as Lloyd’s already speaking out strongly in
favour of continued EU membership. Firms will have to plan
for a variety of outcomes, however. Reform of the Human
Rights Act will also emerge as an issue later next year as the
consultation reaches a conclusion and this may include
proposals to opt out of European human rights conventions
and associated legal processes.
Searchforvalueinmergersandacquisitions
We are entering a dangerous phase in the mergers and
acquisitions (MA) cycle. The wave of activity over the last
year has pushed up acquisition costs and reduced the number
of obvious targets. This means that finding value will become
harder and realising value through synergies more challenging.
That will not reduce the pressure from analysts on CEOs to
make a big play. Another key factor in the volume of MA
activity will be Solvency II, which will see some firms exit lines
with a high capital cost while others diversify so as to reduce
their average capital weighting.
Diversity will hit boardroom agendas
Diversity in the boardroom, among senior management
and across the entire workforce, will come into sharper focus
over the next year. The influential London Matters report
published last November highlighted the urgency of the issue
for the London Market as it strives to compete with other
international insurance hubs. This joins other important
initiatives such as iWIN (Independent Women In Insurance)
David Pollitt
Partner
dpollitt@dacbeachcroft.com
Theuseofsocialmediawillalsobecome
moresophisticatedasfirmsgainabetter
understandingofhowcustomersuseitand
whichplatformstheyprefer.

In-depth analysis
Fresh thinking on today’s big issues.
Whether it is new perspectives on old
problems or perceptive insights into
the new challenges of technologically
driven change, these four thought
leadership pieces will stimulate
discussion and debate.

Growing privacy and cyber liability in the UK will boost the cyber insurance market, but liability
insurers will need to examine their exposures if they are to avoid a flood of unexpected claims.
Risingtideofcyberrisks
couldswampthemarket
W
ith new technologies, personal data is
becoming integral to modern-day
life. But attitudes to privacy are
changing, and regulatory and legal
trends are likely to result in more successful claims for
damages following a data breach. For liability insurers
this has important consequences. As currently
drafted, insurance contracts – ranging from
professional indemnity (PI) and directors’ and officers’
(DO) to commercial combined policies – are
exposed to privacy liability claims. Insurers need to
give careful thought to what this emerging class of
liability means to them and what action they must
take to avoid unintended consequences.
Personal data is becoming more valuable and its
usage more complex – big data and new technology
will see more and more personal data collected
and shared with increasing sophistication. As we
increasingly move into the digital age, data protection
laws will no doubt evolve. Even now, the EU is
considering a new data protection regime, while
many aspects of existing data protection law are
being tested in the courts.
One important area in which the law is being tested
is around the damages a data breach victim is able
to claim. Until recently, the Data Protection Act
1998 (the Act) required a claimant to demonstrate
a financial loss first before they were able to seek
damages for distress. This has proved a significant
hurdle preventing many claims for breach of the Act.
However, in recent years the courts have shown an
increased willingness to find ways to award damages
for breaches of privacy. For example, there have
been a number of cases where courts have awarded
nominal damages for financial loss in order to award
more substantial damages for distress. The Court of
Appeal’s decision in Vidal-Hall and others v Google Inc
(Vidal-Hall v Google), however, simply cuts through
this hurdle and the need for judicial workarounds.
Landmark case
On 27 March 2015, in a landmark decision, the
Court of Appeal granted three claimants permission
to pursue Google for compensation for distress
caused by breaches of the Act. In doing so the
court confirmed a new tort of the misuse of private
information.
Vidal-Hall v Google concerns Google’s allegedly
secret collection of the internet usage of Apple Safari
users through the use of cookies that circumvented
Safari’s privacy settings. The claimants claim Google’s
actions damaged their personal dignity, autonomy
and integrity and caused them anxiety and distress.
Crucially, they do not claim to have suffered any
financial damage.
“What we are now seeing is the emergence of a new
class of privacy liability,” says Hans Allnutt, Partner at
DAC Beachcroft. “The Vidal-Hall v Google judgment
recognises that individuals should be compensated,
even where they have not suffered a financial loss.
As a result, organisations now face an increased risk
of claims for compensation following a breach of
privacy or the Act,” he says.
The desire of the courts to compensate individuals
for breaches of privacy is shared by the regulator. In
Vidal-Hall v Google, the Information Commissioner’s
Office intervened in the proceedings and stated
that compensation must be available to people
for their moral damage caused by companies’ data
protection breaches. UK data protection law is
also set to change under the proposed EU Data
Protection Regulation, which is likely to clarify the
situation for damages.

Professional indemnity
The Vidal-Hall v Google decision is potentially
very significant for professional services
firms, many of whom hold large amounts of
confidential and privileged client data, as well as
data belonging to third parties. For example, a
law firm handling a high-net-worth divorce case
would hold highly private information relating
to their client’s spouse, which could potentially
expose them to a third-party claim should there
be a privacy breach, notwithstanding the spouse
not being a client of the firm.
“Solicitors’ PI insurers are potentially exposed to
data breach or privacy claims through the main
insuring clause for losses arising from private legal
practice,” explains Clare Hughes-Williams, Partner
at DAC Beachcroft. “There will be a debate as to
whether this exposure is covered by the main
insuring clause and insurers may try to formulate
an argument that data breaches do not arise
from the normal course of business. However,
this is unlikely to be a straightforward argument
and it therefore may not be possible to avoid
privacy exposures.
“The question will be whether to cover privacy
exposures under a standalone cyber insurance
policy and exclude them from PI insurance, if this
is indeed possible.”
Minimum standards of indemnity cover are
typically set by professional bodies, which
regulate professions like law and accountancy.
So any attempt to exclude privacy-related
exposures from PI policies would have to be
agreed by the relevant professional body, explains
Hughes-Williams. PI underwriters should look
to understand more about their data and
privacy exposures and what risk management
“While still under negotiation, the proposed EU Data
Protection Regulation should be much clearer on
the type of compensation that can be sought, and
I expect the right to claim damages for emotional
distress alone will be included. The courts are already
moving in this direction with the support of the
regulator,” says Allnutt.
Many liability insurance policies will indemnify
privacy claims under general insurance clauses, cyber
extensions or specific wordings relating to data
protection or privacy.
“Cyber insurance gets all the attention, but a wide
range of traditional insurance policies do provide some
cover for data protection and privacy liabilities. There
is now a potentially significant exposure under data
protection and ‘invasion of privacy’ clauses for insurers,
clauses that have not yet been fully tested in the face
of such claims,” says Allnutt. “All liability underwriters
need to look at how their policies would respond
to such claims and whether wordings meet their
intentions. They should consider whether they need
to amend wordings and ask more questions around
privacy, cyber security and the use of people’s private
information,” he says.
50 predictions DevelopmentsIn-depth analysis

Trend toward notification
Data breaches continue to hit the headlines. And while data protection laws are evolving,
the general direction of travel suggests that companies will increasingly be required to
notify regulators and individuals when there has been a breach of data security.
Under current UK data protection law, most companies are not legally required to notify
the regulator or individuals following a data breach. However, current regulatory guidance
is that serious breaches should be notified to the regulator and consideration given to
notifying affected data subjects. If companies do not, they could face higher sanctions.
Corporate social responsibility is also resulting in an increasing number of companies
voluntarily notifying data breaches. A long-touted revamp of the EU data protection
regime is currently being negotiated in Brussels, and current drafts of the legislation suggest
some form of compulsory notification regime will be included.
“The general consensus is that compulsory notification of regulators and data subjects will
be introduced, although the finer details of any such requirements are still being negotiated
by European lawmakers,” says Allnutt.
First-party costs associated with a data breach and subsequent notification can be
expensive. Such costs are not typically picked up by third-party liability policies, justifying
the need for specialist cyber covers that indemnify a range of breach-related costs,
including legal, forensic, notification and crisis management services.
procedures insureds have in place, she advises.
“Proposal forms could be amended to ask
questions around the IT systems, business
processes and training, which should make it
easier to assess the exposures and rate the risk.”
Directors’ and officers’
Growing privacy liability also has implications for
directors and officers and their insurers. Vidal-
Hall v Google could give rise to new grounds for
a company to sue its directors if they fail to take
reasonable steps to prevent a breach, or unlawful
use, of personal data, according to Karen Boto,
Associate at DAC Beachcroft.
“It is too early to say for certain that we will see
a surge of claims, but there is an increased risk.
There are potential scenarios that could lead
to more claims being pursued against directors
and officers, as well as claims for costs associated
with regulatory investigations,” says Boto. “For
example, companies may more readily sue the
former board in the event of an insolvency or if
the board has been replaced, as a result of public
demand, following a major data breach.”
DO insurance typically provides broad cover
for losses sustained for claims arising from a
‘wrongful act’. So if a director neglects to prevent
a data breach, the loss is likely to be indemnified
under Side A and B cover. Loss suffered by the
company itself could also potentially fall under
Side C entity cover, if it is not restricted to
security class actions.
“Insurers should look at Side C cover to ensure
that it is not so wide as to respond to the
company’s losses relating to a data breach or
misuse of information unintentionally. These
could potentially exhaust the policy limit of
indemnity leaving nothing for the directors and
officers,” advises Boto.
“DO policies do not typically expressly refer to privacy
risks – the cover offered is usually so broad that it is not
strictly necessary. Nevertheless, brokers and insureds
are pushing for specific cyber extensions to obtain
clarification of coverage. While new, these extensions
will probably evolve over time and may feature breach of
privacy and information misuse in due course.”
Commercial combined
Commercial combined insurers could also face
unexpected claims associated with a privacy breach or
misuse of personal data through public liability and, to a
lesser extent, employers’ liability coverages. The principal
exposure arises through the main public liability insuring
clause – to indemnify the insured for legal liability to pay
compensation for damages that may arise from personal
injury, property damage or nuisance and trespass.
“The emerging privacy liability tort could provide a new
line of cases relating to personal injury. Underwriters
Itistooearlytosayforcertainthatwewillseea
surgeofclaims,butthereisanincreasedrisk.

typically think of personal injury in terms of
physical harm, like slips and trips, and few would
contemplate a person suffering injury through a
breach of privacy or misuse of information,” says
David Bear, Partner at DAC Beachcroft.
To claim compensation for personal injury,
a claimant would typically have to suffer
a recognised medical condition. However,
it is possible to imagine scenarios where a
data breach could trigger or contribute to
a psychological condition, such as reactive
depression or anxiety neurosis where the
claimant would be regarded as the primary
victim. For example, the release of information
relating to a person’s sexuality, lifestyle, medical
conditions or personal views could give rise
to significant distress, triggering depression or
severe stress.
“Underwriters of both public liability and
employers’ liability need to give thought to
potential personal injury for moral damage and
distress arising from the misuse or release of
personal data,” says Bear. “There are already cases
that set the bar for personal injury for mental
conditions, and stress or reactive depression,
supported by proper medical evidence, can
get over the line for the purposes of a personal
injury compensation claim. This is definitely
one to watch and one for underwriters to think
about.
“Extensions to public liability policies, some of
which relate to data protection law, may also
give rise to exposure. Such extensions were not
written with moral damage and distress without
financial damage in mind. However, they could
potentially give rise to claims where anxiety or
distress falls short of what is needed for personal
injury,” adds Bear. “Underwriters need to decide
whether they are prepared to write and accept
liability for this new tort, and whether they want
to amend policy wordings as a result,” he says.
It is possible to take steps to limit exposure
to data protection claims in public liability
policies. However, employers’ liability insurance
is compulsory and must meet minimum
standards of cover. “Underwriters need to ask
questions about data protection, and give some
careful thought to extensions and exclusions as
this is a new class of tort in today’s data-intensive
world,” says Bear.
Standalone cyber
Standalone cyber insurers will also face a growing
exposure to privacy liability. However, on balance
they should benefit from increased awareness
and demand for their product. As discussed, the
cover under traditional liability policies could
be said to be limited, unclear and untested. As
liability insurers assess their exposure, they may,
where allowed, limit their liability and introduce
exclusions.
Standalone cyber insurance, in contrast, is
specifically designed to cover data and privacy
claims and will offer clear cover for both
liability and first-party costs. In addition, cyber
underwriters are best placed to assess the risk
and price their policies based on clients’ data and
cyber security profile.
“Cyber underwriters should consider the
implications of an increase in privacy-related
claims but with their expertise they are much
better positioned to assess the exposures and
should benefit from increased awareness and
demand for cover,” says Allnutt.
FOR MORE INFORMATION
To discuss the issues raised in this article, please contact:
Hans Allnutt
hallnutt@dacbeachcroft.com
David Bear
dbear@dacbeachcroft.com
Karen Boto
kboto@dacbeachcroft.com
Clare Hughes-Williams
chugheswilliams@dacbeachcroft.com

M
A has a cycle, just as underwriting
does. When MA is booming,
prices tend to rise and value tends
to decrease. The market can fall
victim to a fear of missing out: the media reports
deal activity and so shareholders start to expect
it to be on their company’s agenda, CEOs begin
to measure their success against the size of the
latest deal and the investment banks call with
increasing urgency.
We have entered that phase where rigorous
and objective valuation can start to give way
to looser multiples of earnings and it becomes
difficult to resist speculation: ‘The value will
come from synergies’ or ‘We will do more
with less’. The reality is very different: it pays
to remember that somewhere between 70%
and 90% of acquisitions fail to deliver the value
expected by the buyer. If investment discipline
is not maintained then the deals start to destroy
value, not create it. It is essential to evaluate
each potential target methodically, by reference
to a sound valuation model and on the basis of
thorough due diligence. Integration must also
be planned with the same relentlessness and
attention to detail.
Whathasbeenlessobviousovertheyears,isthatthe
regulatorwill,whereitthinksnecessary,requiretarget
insurancecompaniestobeovercapitalisedasabuffer
againstthebasisriskinherentinnewownership.
Solvency II has made target valuation more complex and more critically important
at a crucial time in the mergers and acquisitions (MA) cycle. The Prudential
Regulation Authority (PRA) has also raised the stakes – not necessarily in the way
you might think.
Mergersandacquisitions:
dangerouswaters
Integration,
integration, integration
Some commentators (and some CEOs) maintain
that integration is unnecessary, pointing to private
equity (PE) portfolios as proof. This in our view
misunderstands the way PE firms manage capital,
putting representative directors on the boards of
their portfolio companies to drive a relentless
common focus on returns. It also ignores that,
unlike most PE acquisitions, MA in the re/
insurance market always involves buying a
significant amount of duplicate infrastructure.
If that is not dealt with, and quickly, then
shareholder value evaporates: to give a real-life
example, few things kill synergy like maintaining
19 general ledger systems.
In fact, something that has gone relatively unnoticed
in 2014/15 is the quiet integration of the Lloyd’s and
Companies’ Market operations of several insurance
groups previously run on a decentralised basis. This
will not only generate cost savings and capital
efficiencies, it will enhance the leadership of senior
management and prevent group subsidiaries from
cannibalising each other in a fight over common
lines of business. This is a trend we expect to see
accelerated in future insurance market MA.

Solvency II has made valuing an insurance
company for an acquisition more complex than
before. When evaluating an acquisition CFOs
now need to run at least two financial models –
one based on International Financial Reporting
Standards (IFRS) or Generally Accepted
Accounting Principles (GAAP) for their
shareholders and the analysts, the other based
on Solvency II capital and technical provisions
for the PRA.
It might be wondered why this is new. The
PRA and its predecessors have for years been
gatekeepers to UK insurance sector MA:
no acquisition or even substantial minority
investment can happen without the regulator’s
approval under Part XII of the Financial Services
and Markets Act 2000 (FSMA).
The PRA must apply statutory criteria in
deciding whether to approve a change in
control (sections 185-186 FSMA) but these
criteria are drafted widely enough to give the
regulator a significant degree of judgement in
deciding whether to consent to a transaction
going ahead. Notwithstanding other factors,
historically approval has (unsurprisingly) been
withheld unless a buyer can demonstrate how
the target will meet its individual and group
capital requirements post completion.
What has been less obvious over the years,
particularly to prospective investors from
outside Europe, is that the regulator will,
where it thinks necessary, interpret sections
185 and 186 FSMA to require target insurance
companies to be overcapitalised as a buffer
against the basis risk inherent in new ownership.
Challenge of Solvency II
Now Solvency II has changed the basis on
which insurers must demonstrate their financial
position to the regulator. Previously, insurers
and prospective buyers could demonstrate
their solvency using IFRS or GAAP in the same
way as they calculated their annual accounts.
However, Solvency II requires insurers’ technical
provisions, reinsurance balances and own funds
to be calculated differently from the accounting
rules for published accounts.
Any capital surplus identified in the target
by a sharp-eyed buyer is likely to look smaller
under Solvency II, and smaller still when
considered against the PRA’s stated views on
capital extraction. Perhaps more significantly,
regardless of IFRS, if the Solvency II calculations
demonstrate a shortfall against the target’s
Solvency Capital Requirement or Group Capital
Requirement post completion, the PRA will
want to see additional funds invested to bring
the target back up to or indeed over those
requirements before it will consent to the buyer
acquiring control. Buyers unfamiliar with the

A hidden advantage – EC3
Where does this leave the hard-pressed CEO or CFO facing bonus-chasing bankers, activist
shareholders and relentless commentary from analysts? When the time comes to do a deal
in the London insurance market, they can count on world-class support in navigating these
dangerous waters. The EC3 postcode is to insurance, reinsurance and broking what Silicon
Valley is to the tech industry. This small corner of the City can supply expertise in corporate
finance, legal, accounting, actuarial, risk management and taxation, all tailored to
international insurance.
Specialist advisers know what matters to your business and focus on it, reducing your time
to market, enhancing your due diligence with experienced insight and supporting your
post-acquisition integration with an understanding of how your company and your market
work. Those are advantages no generalist can match: innovative, insurance-focused
professional support is essential to the London Market’s vision for the future.
Solvency II requirements (and there are plenty
of non-EU investors looking at London Market
targets) may be in for a shock when they bring
their proposals to the regulator.
PRA pressure on capital
As if that were not enough, in our experience
the PRA is unlikely to allow buyers facing a
regulatory capital shortfall in their acquisition
target or elsewhere in their group to rely on
transitional measures that would otherwise
allow insurers more time to reach their capital
compliance requirements. The regulator’s
approach seems to be that if you’ve got the
capital to contemplate an acquisition, you
should first use that capital to comply with
Solvency II.
In the early stages of the MA cycle, if a buyer
has to make good a solvency deficit there is
simply a net reduction in the gain that the
target’s shareholders make from the deal, as
the buyer would spread its available capital
between filling the gap and paying for the
shares.
At the point in the cycle where MA
becomes a seller’s market, however, buyers
seek to use additional capital to fill the gap, as
sellers resist attempts to lower the price and
there is no shortage of substitute buyers. The
insurance market is at or almost at that point
in mid-2015.
ThePRAisunlikelytoallowbuyers
facingaregulatorycapitalshortfalltorely
ontransitionalmeasuresthatwould
otherwiseallowinsurersmoretimetoreach
theircapitalcompliancerequirements.
These conditions can lead buyers to stretch
themselves financially in making acquisitions.
Previous acquisition cycles have been fuelled
by corporate buyers seeking debt finance in
the capital markets; this in turn fed cycles of
refinancing legacy acquisition debt. Current
market conditions suggest that leverage for
the latest MA boom will come from private
equity and pension fund investment. In
that regard it was very interesting to see the
innovative deal that Fairfax announced almost
immediately after its acquisition of Brit, to
divest close to one-third of its newly acquired

holding (in some ways more redolent of a
banking sub-participation than a conventional
joint venture).
None of this is to deny that there are
opportunities in MA for those with an eye
for value, nor to reject leverage as a means for
converting those opportunities into profitable
gain: both will continue in the short term. It is,
however, a caution against the risk of an MA
spiral. Finding value will become increasingly
difficult as prices rise and integration will
become harder as the number of potential
targets reduces.
The takeaway for acquisitive insurance
groups, and for their General Counsel, is that
the valuation of MA targets must now be
combined with capital planning and corporate
structuring. Buyers should seek to optimise
all relevant Solvency II positions before and
after the acquisition, if necessary raising capital
or sub-participating the deal, provided that
doing so leaves enough value in play to make a
difference to the buyer’s shareholders. ‘Synergies’
and other intangibles will only deliver value if
ruthlessly pursued.
Buy at all costs?
It will be tempting to buy at all costs as pressure
from the media and analysts builds, but
investment discipline is crucial. The corporate
world well beyond the insurance market is
littered with examples of MA that have failed,
usually when boards have abandoned once
well-thought out plans and financial models.
Inevitably, we will look back in five years’ time
and question some of the deals that have made
headlines in recent months, but statistically
only 10-30% of them will have delivered or
exceeded the value anticipated by the buyer.
Adrian Williams
adwilliams@dacbeachcroft.com
Deal Value US$ Date
(where disclosed)
ACE – Chubb $28.3bn July 2015
Willis – Towers Watson $18bn June 2015
Tokio Marine – HCC Insurance $7.5bn June 2015
Exor – PartnerRe $6.9bn August 2015
XL – Catlin $4.35bn January 2015
Fairfax – Brit Insurance $1.9bn February 2015
RenaissanceRe – Platinum Underwriters $1.9bn November 2014
Hyperion – RK Harrison March 2015
Willis – Miller Insurance Group January 2015
Qatar Insurance Group – Antares February 2014
Hamilton Insurance Group – Sportscover November 2014
Underwriting and Kinetic Insurance Brokers
Keymergersandacquisitionsannounced
intheinsurancemarket

A
rson kills, but it also costs society billions
each year through property damage and
emergency response. Despite the high
toll, preventing arson is currently not a
priority for the government, emergency services or
insurers, who shoulder much of the cost. That could
be about to change.
A push by the Arson Prevention Forum (APF) to
put arson prevention back on the agenda is gaining
traction, presenting the insurance industry with
an opportunity to join, and potentially shape, a
concerted effort to drive down the cost of arson.
Increased co-operation between key stakeholders,
better data and greater levels of investment are
required. Crucially, the issue needs leadership.
The insurance industry’s participation is seen as
critical to any future success, and the engagement
and commitment of insurers at a senior executive
level is now desperately needed.
Fire facts
Specific statistics on the cost of arson are non-
existent – which is one of the issues hampering
action on loss prevention – but a rough estimate
puts the annual cost of arson in England at about
£1.7 billion, or £4.7 million per day.
The trend in fire statistics overall has been positive.
Deliberate fires attended by the fire services in
England reduced by 76% over a ten-year period
ending in 2013, according to the latest fire statistics
monitor.
Despite the decrease in the number of fires, there was
an upward trend in both the number of fire-related
insurance claims and the cost of claims between 2004
and 2012, according to the Association of British
Insurers (ABI).
Its members continue to pay out over £1 billion in
property damage fire claims every year, suggesting
that UK insurers face something like a £500 million
bill for arson annually. For insurers, arson is one of
those predictable grey swan events where a renewed
effort to improve resilience in order to reduce losses
is needed.
With current economic conditions and the squeeze
on public sector spending, arson prevention appears
to have become a lower priority for government
and emergency services, according to Lee Howell,
Independent Chairman of the APF and Chief Fire
Officer for Devon and Somerset.
“Current efforts to combat arson could potentially be
weakened as a result, which would have a negative
impact on insurers,” Howell says. “It is in everyone’s
interest to tackle this issue. Arson is a huge expense
for the public sector and insurers alike.”
Call to action
Against this backdrop, the APF published a major
report on the state of arson in the UK in September
2014. Billed as a ‘call to action’, the report made a
series of recommendations to the government, the
emergency services and insurers. Its principal message
is that there is no national strategy to tackle arson.
In particular, there is no joined-up thinking or co-
Industry leaders need to step up to the plate, show leadership and engage
with a major new arson-prevention initiative.
Tacklingthethreatofarson–
whoseproblemisitanyway?
Asakeystakeholderinany
renewedefforttocombatarson,
theinsuranceindustryhasbeen
surprisinglysilentandoften
merelyreactionary.

Lack of arson statistics
One of the biggest barriers to creating a national strategy for arson is the
lack of comprehensive arson statistics, due to different definitions of
arson and a lack of co-ordination between stakeholders. The police and
the Home Office do not record specific arson statistics, while the fire
and rescue statistics only record fires as deliberate, accidental or
unknown. So, while the fire services record the theft and setting alight
of a vehicle as arson, the police classify it as theft.
The insurance industry also does not record arson claims in detail.
Industry fire claims statistics do not distinguish between causes of fire
claims, instead they are based on fire brigade notifications, which only
identify ‘deliberate’ fires, rather than arson.
“There is an underlying problem of lack of common data sets. There is
no common picture and without accurate industry data the scale of the
problem remains hidden for insurers,” says Howell. The ABI has a
fundamental role in co-ordinating the insurance industry’s approach to
arson, he adds.
There is a clear need for insurers to improve data on arson to inform loss
prevention strategies, according to former Law Commissioner David
Hertzell. “Data is not even at first base in terms of defining arson and
related fraud, and it seems sensible to start logging it,” he says.
One positive sign is that the Arson Prevention Forum is due to sign an
information-sharing agreement with the Insurance Fraud Bureau to
map fraud data.
Key fire statistics
• Around half of all fires attended by Fire Rescue Services are said to
be deliberate – in the 12 months to March 2014 there were 170,000
fires attended by the fire services, of which 46% were classified as
deliberate.
• Deliberate fires reduced by 76% over a ten-year period ending in 2013,
while non-fatal casualties halved over the same period, according to
the latest fire statistics monitor.
• Measures to reduce accidental fire deaths have met with huge success,
yet deliberate fire deaths have not reduced at the same rate and now
account for 25% of all fire deaths, up from 20% in 1999.
• A high proportion of deliberate fires are associated with private
dwellings, however, commercial claims account for a far higher
proportion of the cost.
• The retail sector suffered the largest arson losses. Over a five-year
period deliberate fires cost the retail sector £49 million, an average of
£833,102 per claim, according to the Fire Protection Authority’s large
loss data.
• The economic cost of arson in England was estimated at £1.7 billion in
a report published in 2008 by the Department for Communities and
Local Government – The Economic Cost of Fire – a reduction of 10% on
2006. This figure included property damage of £543 million, the largest
single cost, while the response cost was £524 million.
operation among key stakeholders on fire prevention,
while investment is pitiful across the board.
One of the big problems is that arson suffers from
a lack of ownership. The fire brigade puts the fires
out, insurers pay the bills, and the police and Crown
Prosecution Service try to catch and prosecute the
culprits. It is no one organisation’s sole problem and
little is happening to understand and learn from
what is happening in each silo. As a key stakeholder
in any renewed effort to combat arson, the insurance
industry has been surprisingly silent and often merely
reactionary. The industry led the debate on insurance
fraud, but it is not visible when it comes to the
problem of arson.
The insurance industry also spends very little on
arson loss prevention in comparison with the cost
of deliberate fire claims. Insurers spend some £200
million per year (15%) to identify £1.3 billion of
insurance fraud, but it does not invest anywhere near
the same proportion to prevent half a billion pounds
in arson claims. As arson gives rise to loss of life and
costs society and the insurance industry dearly, many
may ask: why is so little being invested in prevention?
Need to engage
Arson is clearly not getting the attention it deserves,
in government and within the insurance industry. The

risk and will continue to use their experience in
these sectors to reduce the number of deliberate
fires,” says Shepherd.
Making headway
Following the call to action by the APF,
momentum has been gathering, according to
Howell. The body presented its recommendations
to the All-Party Parliamentary Group on Insurance
Financial Services at the end of January and won
the support of Jonathan Evans MP, chairman of
the group up until the election.
With the support of Evans, the government and
emergency services are now engaging with the
APF. “There has been a groundswell of progress
being made,” says Howell. “We now have the
engagement of the Crown Prosecution Service
and Home Office, while the Fire and Rescue
Service recognises that it needs to do more. The
ABI is now looking to work actively with us to
move the agenda forward.
“We have been pushing for the government to
take a leadership and strategic role and there is
cause to be hopeful that there will be greater
emphasis on co-operation as a way to bring down
the cost of dealing with arson and reduce risk to
society. If we do nothing, the cost of arson will
continue to climb at a time when money is tight
for the public sector and the insurance industry.”
Thanks to the work of the APF there has been
renewed interest in arson and growing dialogue.
However, the government will not solve this
problem for insurers, neither will it provide
additional public money.
Arson prevention is now about raising awareness
of the issues, about co-ordination, ownership and
leadership. People in the industry need to care
enough. Fire kills and has huge consequence in
terms of cost.
APF’s call for action
The Arson Prevention Forum (APF) (formerly the Arson
Prevention Bureau) is the principal industry body
responsible for raising awareness and reducing the risk of
arson at a national level. It was formed in 1991, but was
reinvigorated in 2001 with £2.25 million in public funding
and tasked by the government to reduce the number of
deliberate fire claims by 10% over a ten-year period. It
actually helped reduce fire claims by 30%.
Today it receives no direct government funding. Its
strategic funding partners are the Association of Chief
Police Officers, the Chief Fire Officers Association and
the Association of British Insurers. “The APF has an
enabling and facilitating role in the fight against arson.
We should be seen as a supportive partner by insurers,
shining the light on issues and helping to provide
solutions,” says Lee Howell, Independent Chairman of the
APF and Chief Fire Officer for Devon and Somerset.
APF recommendations for the insurance industry:
• Invest in prevention, utilising partnerships with other
agencies;
• Commission research to enable a better understanding
of the risks;
• Collate and disseminate best practice at industry level;
• Collect separate arson claims statistics;
• Share data and insights with stakeholders;
• Report on what has worked previously to drive down
claims;
• Consider the role of sprinklers in reducing the impact of
arson.
Nick Young
nyoung@dacbeachcroft.com

D
riverless cars, crewless ships, pilotless
planes and drones have all quite abruptly
thrust themselves into the insurance
industry’s collective conscience over the
past year. The possibilities have been discussed for
some years but quietly filed away in the “Sometime,
Never” trays. Now those possibilities are becoming
realities and fast rising to the top of the “This Year,
Next Year” trays.
As they do, it is not just the obvious underwriters of
motor, marine, aviation and transport risks that are
having to take notice but product liability and cyber
risk underwriters too. All face a decade or more of
unprecedented change. Opinion may vary on the
pace of that change but no one doubts that it is
coming fast.
“The arrival of driverless cars on our roads probably
won’t happen quite as quickly as the manufacturers
and producers are projecting but it is definitely going
to happen,” says Craig Dickson, Chief Executive Officer
of DAC Beachcroft’s Claims Solutions Group. “Google
is predicting 2020 but that seems a little fanciful.”
The Google driverless car has already clocked up over
700,000 miles on American roads. But Dickson points
out it is not just about the technology in the cars but
the road infrastructure and a wide range of cultural
considerations.
“A complete shift is unlikely in less than 20 years
but we will see a range of early adopters. These will
include large manufacturing and petrochemical
plants as well as concept cities that will be purposely
designed so they don’t have any non-autonomous
vehicles. This could easily be somewhere like Milton
Keynes, which lends itself perfectly to the technology with
clear lines, wide roads and a good cable infrastructure.”
Milton Keynes is one of four locations for the Department
for Transport sponsored studies into driverless cars, along
with Bristol, Coventry and Greenwich. These involve
manufacturers, safety experts, academics and a wide range
of transport interests as well as legal and insurance experts.
Early hesitation
Dickson says that the acceptance of autonomous vehicles
will take time but will probably happen faster than people
think as people’s understandable early hesitation about
letting technology take control of their journeys rapidly
recedes. The initial doubts over driverless trains when
they were first deployed on the Docklands Light Railway
quickly vanished and now people hardly question whether
they are getting on a train or tram that doesn’t have a
driver.
On the seas the pace of technological development is
similar but the readiness of entrenched interests in the
maritime industry to accept change might prove an
inhibitor of the deployment of crewless ships.
As with the aerial drones, the American military machine
is one of the key driving forces behind the development of
drone vessels. It is thought to be close to deploying them
A revolution is sweeping the world of transport, a revolution that will see people and
goods transported by road, sea and air without the assistance of human beings. Fantasy?
Generations away? Not according to a panel of experts at DAC Beachcroft.
Cars,shipsandplanes–
andnotadriver,skipper
orpilotinsight
Therearehugepotentialbenefits
intakingcontrolofcars,shipsand
planesoutofthehandsofhumans.

DACB_IMCT_Report_2015-16

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