2022 insurance industry forecast: trends and future risks

2021 saw the insurance industry grapple with a multitude of challenges including pandemic impacts, disruptive technology and climate related risks. Here, we explore the key legal and regulatory developments across 10 business critical topics that insurers and corporates should consider as part of their operational resilience plans for 2022.

As we move into 2022, insurers will face continuing challenges. Adapting to new technologies and achieving net-zero will be central to the insurance agenda, to which we add the shifting geopolitical landscape.

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Resilience will be the overarching theme for 2022. However, whilst last year necessitated a faster pace of change than was perhaps ideal, looking forward, insurers will want to continue to adapt to protect their operations, market and promote customer retention.

Customer demand for more interactive and efficient digital platforms and products is set to continue, which will require insurers’ ongoing adaption to new technologies. With that will likely come associated cyber risks, with ransomware and supply chain attacks continuing to rise. However, digital transformation remains essential for insurers wanting to stay relevant, competitive and reputationally sound in the current market.

The increased examination of insurers’ own Environmental, Social, and Governance (ESG) commitments will be a priority for firms as they wait to see how moving from voluntary to mandatory disclosure requirements plays out. Notwithstanding the shifting regulatory landscape, insurers – like most companies – know that it is probably only a matter of time before regulators or the general public discover any discrepancies in ESG promises, putting reputations at risk.

Geopolitical impacts remain a major concern to global governments and business. Post-Brexit negotiations continue into 2022 as agreements around both goods and services remain unresolved. Concern over future state conflicts remain high with physical, cyber and trade impacts following sanctions looming large; the current tensions between Russian and the Ukraine highlight the reach of these disputes.

Against this background, we highlight some key legal and regulatory developments, and provide an overview of 10 business critical topics that insurers and corporates should consider as they plan for operational resilience in 2022.

Legal and regulatory developments


2021 saw the UK courts grapple with pandemic related issues - not least the FCA test case - as well as an increase in group actions and ESG related litigation. These issues were reflected in the legislative and regulatory programme, along with a focus on post-Brexit reforms. These trends look set to continue. 

New rules and regulations mushroomed during 2021, not least as the UK began to manage the end of the Brexit transition period. The ongoing impact of COVID disrupted the usual programme of legislative change and so much of what begun last year is set to continue in 2022, with big tech and sustainability taking centre stage.

Insurance firms will be watching to see if Solvency II reforms are now introduced into the UK. Meanwhile, ESG will remain high on the regulatory agenda.

On climate, we can expect an ongoing narrative from the FCA about adapting the regulatory framework to support insurers meet their important role in the transition to a low carbon economy. And on diversity and inclusion, the PRA and FCA intend to consult on more detailed proposals in Q1 2022.

A specific post-Brexit change included the Environment Act which became law in November 2021, creating a new environmental watchdog, known as the Office for Environmental Protection (OEP). This government body will replace the European Commission as the enforcer of environmental regulation. 

Looking forward, more broadly, we can expect the UK Government continuing to drive their levelling up strategy, following the long awaited publication of the Levelling Up White Paper on 2 February which aims to 'transform the UK by spreading opportunity and prosperity to all parts of it'.

That agenda manifested with the Building Safety Bill being introduced to the House of Commons in July 2021, just over four years since the Grenfell Tower disaster. Royal Assent is expected in the first half of 2022.

Elsewhere, and maintaining its focus on technology innovation, the UK Government launched a Future of Transport programme, with the aim to ‘shape transport innovation and make the UK a world leader in transport movement’. While it is imperative that regulation adapts to technological advancements, caution must be exercised in light of the potential additional risks to insurers arising from the current proposals.

This trend for regulatory reform and the themes prioritised in 2021 look set to continue throughout 2022.

Key topics to watch in 2022

Here, we explore the key legal and regulatory developments across 10 business critical topics that insurers and corporates should consider as part of their operational resilience plans for 2022.

We have broken these down into four main topic groups: Political landscape, Societal issues, Technology and Legal and Regulatory.

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Political landscape


The UK political landscape will continue to evolve throughout 2022, with post-Brexit reforms such as Solvency II, the regulation of the London insurance market, ongoing trade negotiations and 'leveling up' reforms taking centre stage. Insurers are facing heightened geopolitical risks due to the fallout from the pandemic and a rise in global tensions. Here we look at...

One of the most significant outcomes of Brexit has been regaining the right to negotiate independent free trade agreements.

Last year the UK began formal negotiations to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). If successful, this will have a significant impact on all elements of trade, and the risks attached.

Turning to post-Brexit regulatory reform, levelling up is a useful hook for the industry to leverage and the more the conversation around Solvency II reform can draw on it, the better. To date, the priorities have been the mechanism for releasing capital into long-term investment and delivering on wider governmental policy objectives. However, there is scope for Solvency II reform to play a bigger part in this agenda.

We are expecting the government to launch its Phase 2 consultation as part of its Solvency II Review, and the PRA to publish results of its Quantitative Impact Study in the next few months.

As part of the post-Brexit restructure, it is likely the UK Government will publish a Financial Services Bill in the next Queen’s Speech (expected May 2022) which will be the main legislative vehicle for many of the reforms.

The Bill itself is unlikely to deal substantively with the design of the new Solvency II regime – or whatever replaces it – instead giving the Minister power to delegate that power to the regulators via a statutory instrument. What the Bill will do, and this is where insurers should focus their public affairs resources, is setting the objectives and accountability framework for the regulators. 

A House of Lords committee has recently launched an investigation into the regulation of the London insurance market, and will examine whether regulatory policy can be amended to boost international competitiveness in the wake of Brexit.

As 2022 progresses, we can expect post-Brexit trade negotiations and the push for regulatory reform to continue.

The fallout from the pandemic has heightened the political risk to insurers. It has caused increasingly fragile states, exposed political insecurities, diverted government resources and aggravated mental health problems, making people more vulnerable and susceptible to joining movements for change.

Workers are more likely to become disenfranchised and demand better pay and conditions which can result in strikes and subsequent claims, under both employment and business interruption policies, if not met.

In the World Economic Forum’s annual global risks report, survey respondents pointed to “climate action failure” as the top long-term threat over the next decade. The report predicted that the “disorderly climate transition” was set to continue — and warned that a transition that did not consider “societal implications” risked exacerbating existing inequalities and feeding larger geopolitical tensions.

In a new report produced in collaboration with the Cambridge Centre for Risk Studies, Lloyd’s has explored ways to ease tensions between national power blocs by providing risk solutions that can bind the international community together.

These include helping multinationals manage their increased exposure to political risk through the energy transition towards net zero. Insurers will also be relied on to close the ‘geopolitical protection gap’ in immature markets, providing much-needed coverage to developing economic powerhouses where political institutions may be historically insecure.

Undoubtedly, geopolitical risks and frictions between international communities add a layer of complexity in tackling climate change which will continue to challenge insurers in 2022.

Linked to pandemic impacts, 2021 saw extreme weather events and cyber risks as additional disruptions to supply chains.

These global factors will result in insurers continuing to see claims arise from a variety of sources throughout 2022:

  • Bottle necks and availability (or not) of warehousing space.
  • Problems in physically moving goods due to strikes and protests.
  • The increased risk of hijacking and theft due to limited available routes, looting or security presence being removed from storage facilities.

The inability to move goods also leads to an increased risk of theft, and potential fraudulent claims with malicious actors taking advantage of the inability to track goods. Supply chain management may become more difficult to control. Global sanctions may change as situations develop, resulting in ports being declared unsafe, leading to policy coverage disputes.

Regulatory shifts add another layer to the challenges faced. New customs controls came into force in the UK on 1 January 2022, with British importers now required to make a full customs declaration on goods entering Britain from the EU, and rules of origin requiring exporters to prove their goods qualify for zero tariff access before shipping. Trade associations are already warning that this will hit food supply in particular, with smaller businesses likely to struggle the most.

To avoid the direct impact to operations and the associated reputational damage to a company’s brand, supply chain resiliency is now a priority issue for all businesses, and their insurers.

Raham Gowland Square
In terms of emerging risks, the stand-off at the border between Ukraine and Russia looms large. If Russia does launch an invasion, and if the western democracies respond with enhanced economic and/or trade sanctions, the consequences for companies doing business in, or involving, Russia may be profound.
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Technology continues to be of the upmost importance to insurers in 2022, building on the digital transformation seen in 2021, which offers insurers solutions to meet their ESG objectives. However, this also means navigating the risks associated with disruptive technologies, such as smart contracts and cryptocurrency. In addition, as hybrid working remains the norm moving into 2022, the threat of cyber-attacks needs to be a top priority for both insurers and corporates. Innovation, mitigation and collaboration across industry and regulators will assist in managing this risk. 

2021 has shown that digital transformation offers insurers a solution to allow them to meet their environmental, social and governance objectives.

ESG is not a new concept, but it has been brought into sharp focus by the pandemic and has moved from a fringe concern to the centre of business decision making.  With that comes new kinds of risk for insurers to navigate. It includes components of climate, transitional and social risk that are difficult to evaluate as the data is often seemingly inaccurate due to inconsistent criteria applied, or simply not being collected at all.

The key enabler to the adoption and implementation of ESG commitments is digital transformation. As products and systems improve, insurers will be better placed to effectively manage and report on their ESG risks.

Digital advancements including the growth of smart contracts and crypto assets have provided additional challenges to the legal system. This has resulted in the Civil Procedure Rule Committee looking at the option of amending or expanding the grounds in which proceedings can be served out of the jurisdiction, which can be an obstacle to pursuing litigation and, therefore, resolving disputes involving these new technologies.

The Master of the Rolls recently reported that such cases had increased significantly, and dispute resolution was “proving complex” because of the difficulty of “applying analogue rules to the digital world”.

The frequency, scope and detrimental impact of cyber attacks continued to increase throughout 2021, largely as a result of companies pivoting towards digital operations and the technology behind the attacks becoming ever more sophisticated.

As well as the financial and business interruption losses, a significant and long-term impact of many cyber incidents is the damage to reputation and goodwill. Many organisations are prepared (to a certain extent) for the short-term technical and operational impacts, but are often un-prepared for the longer lasting impact to their reputation.

With many companies adopting permanent hybrid working policies, threat actors will continue to exploit vulnerabilities in working practices, leading to a continued increase of cyber-attacks in 2022.

The industry is responding to these increased threats:

  • The IUA has stated its intention to publish research looking at the cyber impact on supply chain risk as well as continuing its dialogue with the National Cyber Security Centre.
  • When setting out its main areas of focus for 2022, Lloyd’s stated that it will continue to support innovative areas of underwriting, such as cyber.
  • The Council for Licensed Conveyancers has launched a consultation on whether it should make stand-alone insurance for cyberattacks compulsory as it looks to update its policy on professional indemnity cover.

Cyber impacts look set to remain a significant concern for the insurance industry for the foreseeable future, but innovation, mitigation and collaboration across industry and regulators will assist in managing this risk.

Karim Derrick Square Alt
As we go into 2022, it is technology that will enable reliable, measured indexes of individual and corporate ESG credentials. It is technology that will help shine the light on those aspects of the metaverse that rewards falsehoods.

Societal issues


Regrettably, pandemic risk is not something we are able to leave behind in 2021. It is highly likely that new pandemics will occur with increased frequency. Insurers need to now move to more long-term strategies as they look to manage their operational and reputation risk in 2022. In addition, the UK continues to feel the effects of social inflation, in particular, in motor, personal injury and medical negligence, professional indemnity and D&O claims - making it an area of upmost importance from an underwriting perspective.


The global insurance industry is deemed to have come through the initial stages of the pandemic relatively well, but the industry and its regulators must now use this experience to prepare for future pandemics.

Regrettably, it is highly likely that new pandemics will occur, and that they may become more frequent as a result of new diseases emerging and the environment coming under continued pressure.

As insurers move from their initial pandemic response to a longer-term strategy, close attention should be taken of the shifts in consumer behaviour. COVID-19 has influenced the choices made regarding service providers. This goes through all aspects of a business, from social responsibility commitments to the tech solutions offered.

The pandemic has accelerated the trend toward automation and digitization, with initial drivers including changing demographics, customer expectations and competitive pressures. Investment in digital capabilities, talent and other strategic resources are key to the long-term success of all businesses. Companies that invest now and strengthen the bond with their customers have the potential to emerge from the crisis ahead of their competitors.

There are also lessons to be learnt from the FCA test case, most notably the necessity for a review of policy wordings. Products need to be simplified and the current wordings considered against potential future events. This will be key to the insurance industry’s reputational risk management throughout 2022.

Social inflation is one of the major emerging risks that the insurance industry must address this year. In 2021, its influence was felt in motor, medical negligence, professional indemnity and D&O claims.

There is evidence that the impact of social inflation on claims is starting to spread globally due to socio-economic globalisation, and these factors have been amplified by the pandemic. Societal attitudes have changed, which means there will be an increased effect on the insurance industry.

Litigation funding is an increasingly popular practice in which investors finance lawsuits to which they are not a party (and which are often against insurers) in return for a share of the settlement. This contributes to social inflation by increasing litigation costs that affect insurers’ claims pay-outs, loss ratios, and coverage premiums.

It is difficult for insurers to structure safeguards against claims that may be presented against existing policies. However, from an underwriting perspective, a recognition of these claims trends and a review of the impact they have on current wordings has to be a priority for 2022.

Ingrid Hobbs Square
As dealing with the risks associated with the current pandemic moves into the ‘business as usual’ category, we are seeing insurers prepare for a wide range of systemic risks which once seemed remote but are now foreseeable ... As a result, we will see new products coming to the market to protect against these risks and driving resilience.
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Legal and regulatory


The regulatory focus for insurers in 2022 sees ESG requirements remain a priority area. With the revised Green Finance Strategy due to be published this year, businesses in the UK will have to navigate the Net-Zero strategy laid out by the government. COVID-19 continues to influence the digital legal evolution, with remote hearings - and their benefits and restrictions - taking place throughout 2021 and 2022. Additionally, the rise in availability of litigation funding has had an impact on group action claims - an area the UK Government is currently consulting on as we move into 2022.

ESG remains central to the regulators’ focus. From 6 April 2022, over 1,300 of the largest companies and financial institutions will have to comply with the Task Force on Climate-Related Financial Disclosures (TCFD) aligned mandatory disclosure requirements. The FCA has also acted quickly to progress Sustainable Disclosure Requirements (SDR), issuing a discussion paper in November 2021 with the plan to launch a subsequent consultation in Q2 2022.

The UK Government is due to publish a revised Green Finance Strategy in 2022, developing the initial 2019 strategy and building on last year’s Greening Finance Roadmap, which will be critical for setting a clear pathway for a net zero financial system.

Overall, while the building blocks of the UK’s Net Zero Strategy have been laid out, the final shape is not yet clear. 2022 will see businesses in the UK having to navigate an ESG landscape in flux.

The PRA and FCA are also looking to progress their focus on diversity and inclusion in the financial services sector and are proposing to follow their 2021 joint Discussion Paper with consultation and policy statements in 2022.

Whether these proposed developments take place before or after the next parliamentary term, expected by May 2022, remains to be seen. However, regardless of any potential changes in the UK Government (which may lead to a shift in the political agenda towards technologies or trade), regulator activity is likely to stay on course.

COVID-19 dramatically accelerated the accessibility to remote justice. The groundwork was already in place, but necessity meant that the debates had to stop, and the processes activated. Overall, the courts and arbitration platforms responded well.

In 2021, HM Courts & Tribunal Service published an evaluation of remote hearings during the COVID-19 pandemic.

Interestingly, the research found that public users attending remotely were slightly more likely to be satisfied with the overall experience of their hearing than in-person users. 

  • 93% of legal representatives said they felt remote hearings were an acceptable alternative during the pandemic, although views were mixed about how they should be used in the future.
  • 51% of judges thought remote hearings were effective at creating an environment comparable to in-person hearings, but raised concerns about their impact on well-being and increased workload.

Now that the technology is in place to progress the digital legal evolution, this momentum and willingness for advancement must be embraced.

In November 2021, Kennedys responded to the UK Ministry of Justice’s Call for Evidence on the future of dispute resolution in England & Wales, highlighting that technology has the potential to resolve disputes on a more efficient, humanised, simpler and inclusive basis.

Progression of access to remote justice and technological advancements in dispute resolution will assist the UK in establishing itself as the legal jurisdiction of choice for governing transactions involving new technologies, such as blockchain, crypto assets and smart contracts.

The ability to bring a group action claim in the UK sits hand-in-glove with the rise in the availability of litigation funding, as was witnessed in 2021. Group actions are particularly common in certain types of claims, such as competition law, data privacy and breach, financial services, shareholder, environmental, personal injury and product liability claims.

Already in the diary for 2022 are claims against shipping companies for allegedly fixing delivery charge prices, consumer led claims regarding fees charged by Apple and Google for purchases on their app stores, a proposed class action accusing banks of rigging foreign exchange markets, and Meta is being sued for £2.3bn in a class action lawsuit that claims 44 million Facebook users in the UK had their data exploited after signing up to the social network. These are indicative of this trend continuing.

Amantha Silver Square
Business is strongly advised to stress test its capability and capacity to respond to group actions. An increased frequency in group actions is likely to be accompanied by potentially vastly increased group sizes ... Boundaries will therefore inevitably continue to be pushed in the UK and beyond.
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Karim Derrick

Chief Products Officer - Kennedys IQ - London

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