Allianz ranks top emerging liability trends for professional services firms

SINGAPORE – Media OutReach – 11 July 2023 – Architects and engineers face greater scrutiny over building and fire safety defects. Financial services professionals may be accused of mismanaging investment funds negatively impacted by inflation. A lawyer’s untrained use of artificial intelligence (AI) tools when preparing client cases could result in an error-ridden brief. The emerging risk landscape for professional services firms is multi-faceted.

A new report from professional indemnity (PI) insurer
Allianz Global Corporate & Specialty (AGCS) identifies a number of emerging liability trends for companies, ranking them by level of anticipated impact, potential drivers of loss activity and the likely ease with which these risks may be mitigated. Impacted professions include management consultants, auditors, accountants, architects, engineers, solicitors and lawyers, and media executives, all of whom may be held responsible for losses that arise from a perceived breach of their duties.

“Although exposures vary, all these professions face a wide range of civil liability exposures which need to be adequately addressed and mitigated. These could range from accusations of negligence or omissions resulting in harm or damage to the client, to misrepresentation, to failure to identify fraudulent activity, to the unintentional breach of contract, intellectual property rights or confidentiality, and regulatory investigations and actions,” says Diego Assef, Head of the Global Practice Group, Professional Indemnity Claims at AGCS.

Building safety laws and digital dangers such as ‘hackers for hire’ top the trends heatmap

AGCS’ global PI claims experts identify and rank 11 emerging trends in the report with some professions being more exposed than others depending on the risk and the nature of their business.
Evolving legislation related to building safety and
cyber crime, social engineering and data loss, are both ranked #1 (very high – a critical impact to operations or loss severity could be expected). Although building safety has favorably been a UK issue following the
Grenfell Tower fire tragedy in 2017 some impact will be felt globally too the report notes. In the UK, extended liability periods for building and fire safety defects could bring new legal claims against manufacturers and suppliers, with a potential domino effect on all specialists in a construction project, such as architects, engineers and design and build contractors for example.

Cyber-attacks have increased in recent years – and professional services firms are highly exposed due to the proprietary customer data and intellectual property they process or operate with. For example, cyber mercenaries are increasingly targeting law firms in order to illegally obtain confidential or protected data that could tip the balance in courtrooms. These so-called ‘hackers-for-hire’ provide technical capabilities and deniability of involvement in the cyber-attack should it be discovered. Claims drivers, which apply across all professions, include phishing and spoofing frauds, third party supply chain risks, ransomware or malware, a lack of adequate systems or controls or data loss. Not only does a cyber breach present immediate first-party costs and disruption, it can also result in significant regulatory exposures, including action from data protection authorities and considerable fines. Litigation from affected data subjects may follow, including large group claims. Breaches may also lead to client and third-party liability claims, with claimants alleging losses due to business interruption or leaked information. A breach also carries the risk of reputational damage, resulting in stock drops and securities claims. Smaller firms can be more vulnerable as they typically have less sophisticated cyber-security.