The cybersecurity landscape has evolved as such that issues of data breaches, ransomware and other digital threats are expanding beyond companies’ IT departments. According to a recent report from Allianz, despite an overall decrease in new filings, directors and officers (D&O) insurance underwriters are keeping an eye on litigation concerning these expanding cyber threats as well as climate-related ESG liabilities in 2023.
Data breaches and supply chain interruptions can be devastating for a company, and investors and board members are beginning to hold the C-suite accountable for having a plan in place to prevent these attacks and to deal with the aftermath if one occurs. In the event of such an attack, the actions of these company leaders will likely be scrutinized, and any misstep in putting cybersecurity measures into place to reduce harm could be seen as a failure of their duties.
“Ultimately, strong cyber security is down to the culture of the company and its people,” Rishi Baviskar, global cyber experts leader, risk consulting, at AGCS stated in the report. “Directors and executives need to lead by example and ensure that good cyber hygiene such as data privacy and information security trainings are regularly carried out and the company’s cyber security processes and policies are understood by staff and all relevant third parties.”
According to a report from the London School of Economics and Political Science (LSE), the number of climate change-related litigation cases has more than doubled since 2015. The majority of these cases were filed in United States’ courts, but 2021 saw the largest annual number of cases outside of the U.S. – with cases identified for the first time in Italy, Denmark and Papua New Guinea.
There has been a growing push – as well as government pressure – for companies to embrace ESG risk-related considerations and to be transparent with stakeholders about their processes and strategies. Amendments from the U.S. Securities and Exchange Commission proposed in May 2022 would require more specific disclosures from funds and advisers about their ESG strategies. The EU Banking Authority followed in October 2022 when it published recommendations for organizations to integrate ESG considerations into their supervisory process.
“ESG-related liabilities can potentially become significant exposures for D&O insurance,” Lydia Miller, global underwriting and product analyst, financial lines at AGCS said in the report. “The setting of sustainability targets and action carried out to oversee progress towards achieving these goals, steps taken to ensure ESG-related disclosures, recognition of current ESG risks – and the management of them – are increasingly key checkpoints for insurers when it comes to the risk assessment of a company. Companies with strong ESG frameworks and governance will likely find insurers more willing to offer capacity.”