A Look at the Key Insurance Risks For 2024

As we step into 2024, the commercial insurance market is gearing up for another year that may bring potential turbulence. When it comes to safeguarding your business, it is crucial to understand the future direction of risks, rather than only concentrating on their current status. Below, we offer some of the key risks on the horizon for 2024.

Cyber Incidents Rank by a Clear Margin 

The cyber risk landscape for 2024 presents several critical challenges for businesses. Concerns arise from the growing use of biometrics and tracking technology for data collection, posing data privacy risks and potential regulatory penalties. Also, the utilization of AI technology in cybersecurity introduces both benefits and threats, with the possibility of cyber criminals weaponizing the tool. Third, the persistent threat of ransomware attacks remains a significant concern, with a resurgence observed in 2023, leading to increased average ransom payments. Lastly, the rise of Business Email Compromise (BEC) scams, involving cybercriminals impersonating legitimate sources to trick victims into compromising activities, underscores the importance of robust cybersecurity measures to mitigate cyber losses. Harnessing tools and expert insights through the Cyber RiskScript Process, RCM&D utilizes self-assessments, vulnerability scans, limit modeling and technical consulting to determine our clients’ needs.

National Catastrophes and Climate Change

Extreme weather events, such as hurricanes, tornadoes, hailstorms and wildfires, continue to make headlines as they become increasingly devastating and costly. Within the initial month of this year, multiple flooding incidents have already been observed across the country. Additionally, these events are not limited to one geographic area, impacting businesses across the United States. As mentioned in the Allianz Risk Barometer, an analysis by Swiss Re estimates total economic losses from natural catastrophes in 2023 to be $260 billion. A significant count of low-to-medium-severity events has cumulatively resulted in insured losses surpassing $100 billion for the fourth consecutive year, with severe convective storms (SCS) being the primary contributor. RCM&D’s Catastrophic Modeling and Data Integrity solution can help you keep accurate, complete and validated data for making critical decisions regarding the risk and insurance needs of your asset portfolio in the event of a catastrophic loss.

Macroeconomic Risks

Surging inflation has been a persistent concern in the commercial insurance space over the last few years, resulting in eroding investment income and higher administrative costs among carriers, greater underwriting uncertainty, increased claim expenses and rising premiums. Such inflation reached a peak in 2022, evidenced by the highest consumer price index (CPI) in 40 years. In the property insurance space, the costs to repair, replace or rebuild structures and their contents following losses have increased, prompted by rising labor and material expenses. The workers’ compensation and liability insurance segments are also being affected by other forms of inflation, such as medical and wage inflation. According to research from employment website Indeed, wage inflation peaked in 2022 at 9.3% but remained above 4% through 2023. Because payroll is leveraged as an exposure base to calculate workers’ compensation premiums, wage inflation could prompt increased rates in this space.

Political Problems

This past year saw the continuation of severe geopolitical upheaval and international disruptions, particularly those relating to the ongoing Russia-Ukraine conflict, shifting trade dynamics between China and the United States, rising tensions amid the Israel-Hamas war and growing nation-state cyber threats. These global events have had far-reaching impacts, prompting new tariffs, export restrictions, economic sanctions and coverage exclusions. Further, such events have exacerbated existing technological challenges, inventory backlogs, material shortages and supply chain issues. According to a recent survey conducted by Oxford Economics, more than one-third (36%) of businesses currently view geopolitical tensions as one of the top risks facing the global economy. As these events continue, companies should prepare for potential disruptions by closely monitoring evolving global trade policies and considering domestic production solutions (e.g., switching from an international vendor or raw material to a U.S. alternative) to ensure business continuity.

Regulatory Adjustments Elicit Compliance Worries

2023 presented employers with many new and difficult compliance challenges, including federal and state laws and regulations expanding worker protections, widespread adoption of artificial intelligence (AI) in the workplace and increased enforcement actions by federal agencies. In addition to these novel and growing compliance challenges, employers have also had to navigate record-high inflation, economic slowdown and an unusually resilient labor market. Additionally, while the COVID-19 pandemic may be considered a thing of the past for many organizations, employers continue to struggle with the pandemic’s lingering effects on their compliance efforts and obligations. RCM&D’s subsidiary, SISCO, has several viable service options that can help keep your business in compliance.

Preparation Is the Key

While times may be tough, RCM&D stands ready to help mitigate the risks your business can face in 2024. Our dedicated service teams are prepared with innovative solutions and can provide tailored services to ensure you’re ready for what’s next. Talk to a trusted advisor today for more on the top risks for 2024 and how we can help.

This document is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. For more details regarding the information contained in this report, contact RCM&D today.

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