COVID-19 may drive market corrections and insolvencies that could impact financial institutions’ balance sheets, increase exposures for directors and result in litigation.However, financial institutions are also facing many other risks in the areas of cyber, climate, compliance and corporate culture, according to a report, Financial Services Risk Trends: An Insurer’s Perspective, from Allianz Global Corporate & Specialty (AGCS).
An AGCS analysis of €870 million ($1 billion) of insurance industry claims in the financial sector shows cyber incidents, including crime, is the top cause of loss. Insurers see a rising number of losses from outages or privacy breaches with third-party service providers a potential weak link.
According to the report, compliance issues are already one of the biggest drivers of claims and the burden is growing – particularly around economic, social and governance (ESG) factors and climate change.
At the same time, the behavior and culture of financial institutions is under growing scrutiny from a wide range of stakeholders in areas such as sustainability, employment practices, diversity and inclusion and executive pay.
Paul Schiavone, Director – Global Industry Solutions in Financial Services, AGCS, commented,“The financial services sector faces a period of heightened risks. COVID-19 has caused one of the largest ever shocks to the global economy, triggering unprecedented economic and fiscal stimulus and record levels of government debt. Despite an improved economic outlook, considerable uncertainty remains.”