USA Law and Practice Contributed by: Christina Culver, Rhonda Thompson and L. Michael Brooks, Thompson, Coe, Cousins & Irons, LLP
8. Emerging Risks 8.1 Market Overview of Emerging Risks A primary risk emerging in many markets is cyber-risk accelerated by the use of AI. AI supports criminals targeting smaller, non-technical operations that typi- cally do not have the infrastructure necessary to avoid a crime. There appears to be an increase in cyber- claims among real estate agents, title companies, and health-care providers. A second emerging risk is the use of third-party liti- gation funding in the first-party property context. Historically, TPLF has been associated with liability and personal injury claims. As a way to avoid policy anti-assignment provisions, funders are utilising a TPLF-type process, such as using deeds of trust to secure an interest in claim proceeds from an insured. The TPLF entity thereby gains control of claim costs, recovery and decision-making in how to advance claims to litigation. 8.2 Impact of ESG on Underwriting and Insurance Litigation Law and ordinance coverages are increasingly impact- ed by what constitutes a government-mandated requirement sufficient to trigger coverage. Required compliance with environmental mandates increases the cost of claim resolution. It is incumbent upon underwriting departments to stay abreast of local, state and national mandates govern- ing a particular risk in determining whether a policy limitation or exclusion will withstand scrutiny. 8.3 Data Protection Laws Data protection and privacy laws are not keeping pace with the growing threat of cyber-incidents. Con- sequently, underwriting decisions are not able to keep pace, resulting in policies covering risks for which an appropriate premium is not being charged and which have gaps in coverage. Policy forms and endorse- ments are being challenged by the interplay between specialised cyber-policies and traditional policies. For example, an active data breach would expect to be afforded coverage by a specialised cyber-policy, but the policy might also leave exposed costs associated
adversely affect a dispute outcome; and geographical location or a nationality which precludes travel may prevent experts with the unique knowledge, educa- tion and training required in more sophisticated and nuanced issues from being able to assist. 7.3 War, Political Risk and Exclusions As federal government policies change, traditional, tested risk assumed by a carrier can reasonably be impacted. For example, can a federal government’s identification of an act as “terroristic” be dispositive of the coverage afforded by a liability policy’s terrorism endorsement? Similarly, does a federal government’s identification of an otherwise criminal act as “justified” render a policy exclusion for intentional or criminal conduct ineffective? Is a conflict an act of “war” or unrest sufficient to move a particular event in and out of coverage based upon the utilised political terminol- ogy? All of these scenarios create uncertainty in the insurance arena on a state, national and global scale. 7.4 Supply Chain and Systemic Loss Events Trade tensions and sanctions impact this jurisdic- tion largely because they increase the material costs associated with repair and rebuilding. The real-time increased cost of materials, along with changes in the law and ordinances, are increasing cost estimates and causing disputed claims to go to litigation without set- tlements. Likewise, Texas’s booming construction industry uti- lises an ethnically diverse workforce. The instability in federal immigration policy has had a direct impact on the availability and reliability of this workforce. 7.5 Forward Outlook and Market Response Policy wording must keep up with the ever-chang- ing vocabulary and terminology necessary to prop- erly identify the scope of risk a carrier is reasonably assuming. Historically, geopolitical uncertainty can cause downward trends in the economy. When econ- omies struggle, insurance claim volumes also tend to increase.
303 I NSURANCE L I T IGATI O N 2026
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