Organizations across the globe are facing an increased exposure to sexual misconduct liability (SML) claims due to growing awareness and reporting following the #MeToo Movement. Claims against your organization can result in substantial costs, severe operational disruption, and potentially devastating reputational damage.  It is critical business leaders address this threat and implement appropriate risk mitigation measures, as well as establishing robust defense in case of liability claims.  A developing area of litigation Sexual abuse is alarmingly recurrent worldwide. In the US, a 2024 survey by the Newcomb Institute, found that roughly 1 in 4 adults (26%) experienced sexual harassment or assault in the preceding 12 months. While in Australia, the number of sexual assaults registered by police rose by 11% in 2023 — the 12th straight annual rise — to reach the highest rate of recorded sexual assaults in 31 years.  Acts of sexual misconduct pose a high-risk safety concern within workplaces — especially where the care of minors and vulnerable adults is paramount. As the occurrence of sexual misconduct grows, litigation and claims surrounding SML have also increased in recent years due to heightened societal awareness, evolving statutory requirements, and growing scrutiny. Additionally, in the US, the average amount of sexual abuse settlements is also “increasing dramatically”.  Organizations must remain cognizant of changes within relevant law and legislation. For example, depending on jurisdiction, statute of limitations laws may change and enable potential, historical claims of abuse to be lodged.  Some US states have introduced legislation that either extends or waives the statute of limitations for childhood sexual abuse victims. This has allowed victims to sue abusers, years after the alleged wrongful act. The risk of sexual misconduct to businesses SML is not a novel risk to organizations. However, many companies — of all sizes — may have limited experience in preventing, handling, and responding to such allegations.  Organizations that could be at greater threat of SML claims, include: Educational institutions Religious authorities Transportation companies  Healthcare providers Leisure facility management companies Sexual misconduct allegations — whether unsubstantiated or not — can decimate an organization’s reputation. Members of the public and media could interpret a sub-standard response as either victim-blaming, ignorant, or uncompassionate.  Beyond reputational risks, sexual misconduct allegations can have a deleterious effect on wider company aspects. While the USA Gymnastics sexual abuse scandal “eroded trust” between the organization and its thousands of members, sponsorship also dissipated, and threats were made for decertification.  Settlements for SML claims can reach vast sums of money. In Australia, a Tasmanian church was ordered to pay AUS$2.4 million to a victim of sexual abuse, and in the US, two school districts paid settlements totaling $4.8 million to students abused by their water polo coach. Ostensibly, these totals have the potential to render companies insolvent.  Furthermore, perpetrators of sexual misconduct and abuse are frequently repeat offenders — introducing the possibility of class action lawsuits, where allowed.  Creating the correct response Organizations should investigate allegations promptly, confidentially, and with a high duty of care. Establishing proactive risk management and sound prevention tactics can help organizations lessen the risk of sexual misconduct, and potential SML claims.  Employers must introduce measures that reduce the chances of sexual misconduct occurring. It is inadequate to only conduct training and checks at the time of hire. Staff should be subjected to thorough, repeated screening procedures, ongoing training requirements, and supervision policies to lessen the chance of SML incidents. It is critical that company policies and procedures are reviewed and enhanced throughout the year — to help mitigate evolving risk exposures. This is an area that authorities are keen to enforce. As part of a recent settlement, American ride-hailing services company Lyft was ordered to establish “safety and governance reforms” that do more to protect passengers, and limit sexual and physical assaults from drivers.  Both employees and the public should be fully aware of the correct channels to report actual or suspected incidents of abuse or misconduct. This should be clearly signposted and easily accessible.  The initial response following an accusation or incident is of the upmost importance. Appropriate action and interaction with all relevant parties can have significant effects on future outcomes, such as potential claim settlements and organizations’ reputations. Response procedures should be well-documented, regularly rehearsed, and fully understood by all relevant stakeholders.  Insurance: the last line of defense Typically, SML claims are covered under General Liability or Hospitals Professional Liability policies. However, exclusions for SML exposures, and further policy restrictions related to sexual misconduct, are becoming more common. This is, in part, due to insurers’ reluctance to underwrite SML risks on either an occurrence or claims made basis, as claims could result in ‘nuclear verdicts’ — especially in conjunction with statutes of limitations opening up. Consequently, some insurers within the US have reduced, removed, or specifically excluded coverage for SML. SML exclusions or “silent” coverage can create gaps or leave organizations without coverage at all. Affirmative, standalone SML policies can remedy this. Coverage can be secured from the London and Bermudian markets, and provide organizations with suitable balance sheet protection and risk management support.  Key features of standalone SML policies, can include: Funding for defense costs  Protection against retroactive cases (subject to market appetite and risk exposure management for individual insureds) Risk management and crisis response services SML policies can be modified to provide tailored coverage for each organization. This enables underwriters to introduce bespoke solutions, such as:  Availability of limits on both a primary and excess basis Creation of Master Policies, Lineslips, and Binding Authorities Options that can help facilitate efficient underwriting processes for organizations who either have a significant number of locations which purchase individual insurance policies, or to risk portfolios who are looking to create a collective solution. Captive reinsurance  Acting with Lockton It is crucial that business leaders take action to build resilience within their organizations. Beyond bespoke SML coverage to suit your organization, you can find out more on how to protect your business here, or by contacting a Lockton London Casualty team member. 

Organizations across the globe are facing an increased exposure to sexual misconduct liability (SML) claims. This is due to increased awareness and reporting following the #MeToo Movement.

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Addressing risks associated with sexual misconduct liability

The retail industry is facing several emerging risks that can have a severe impact on revenues. These include changing weather patterns, supply chain disruptions, and the consequences of the digitisation of business processes.  Where existing risk mitigation measures are insufficient or traditional insurance policies are unable to cover the risk, parametric insurance solutions can plug the gaps.    The role of parametric insurance  To ensure retailers remain relevant and effective in a rapidly evolving environment they must prepare for potential future disruptions and develop and regularly review risk mitigation strategies. However, no risk management strategy can eliminate all risks, and it is, therefore, worth exploring alternative risk transfer options, particularly for emerging risks.   

Parametric insurance pays out according to predefined triggers based on independent data and offers an efficient and flexible tool to plug gaps in the traditional insurance portfolio. It can, for example, protect against third party supplier risk, supplement sub-limited exposures and protect against non-damage business interruption events when linked to a natural disaster. This could be for example a lack of precipitation or too much of it.   

A business must suffer a loss from the pre-defined trigger event for a parametric insurance to pay out. But, unlike traditional insurance, there is no need for loss adjusters to determine the loss and there are no exclusions for any assets or business interruption losses.   

For some risks such as flood the trigger might be obvious, but for other risks selecting an appropriate trigger can be more complex. The key is that the data source for the reporting agency is independent of both the client and the insurer to ensure complete transparency in the contract. There are various data sources available to measure and trigger policies. Lockton works with several data providers to structure and price a solution that suits the individual needs of each client.   

Advantages of parametric solutions:   Business interruption doesn’t require a physical damage trigger   There are no deductibles   Contracts are transparent and simple   Claims are usually recovered within 30 days as there are no lengthy loss adjuster requirements   Parametric solutions are by their very nature bespoke and uniquely tailored to the risks of each individual business. Set out below are some examples of circumstances where parametric solutions can be deployed.   Supply chain risks   The global supply chain is a vital component of the retail industry. Weather events such as typhoons, floods, and droughts can severely disrupt manufacturing processes and transportation networks. Factories may face shutdowns, and transportation routes can become impassable, leading to significant delays in the delivery of goods.   Tracking devices on vessels, for example, provide real-time data, and can serve as a trigger for payout when delays reach a certain threshold, allowing retailers to stabilise revenue during unexpected events whilst supplying a buffer for those reliant on the global supply chain. A wide range of events can cause delays in the supply chain and extend shipping lead times, including labour strikes or congestion at the ports, increasing costs for retailers, who may need to seek alternative suppliers or expedite shipping through more expensive means.   Retailers dependent on just-in-time inventory processes are particularly vulnerable, as any disruption can lead to stockouts and lost sales. Increasing global instability and the impact of climate change will inevitably impact retailers’ risk exposure and require long-term strategies to enhance and increase the resilience of supply chains.  Weather impact on revenues    Weather patterns have become less predictable and risk mitigation measures such as flexible inventory management and data analytics can only limit losses. A surprisingly mild winter can severely impact sales of coats, boots and winter accessories, and the excess inventory and reduced revenues force retailers to offer deep discounts to clear stock. Similarly, retailers specialising in garden products and furniture may experience a decline in sales in a wet and cold spring.   Technological advancements have created new data points that can serve as triggers for parametric insurance solutions. For example, retail sales data can be analysed to track irregular sales patterns and how well inventory is performing during abnormally mild winters. By looking at historical weather patterns and purchasing trends, we can use data to predict future inventory demand. Parametric solutions can structure an index with this data to create a policy that triggers when there are irregularities in weather which affects the sale of winter inventory. This can help to mitigate excess stock, reduced revenue, and the need to sell of stock at lower-than-desired costs.   Flood   Parametric solutions can protect properties in flood exposed locations. Cover will be based on a selected indemnity value which is paid once water breaches an agreed trigger depth limit. The water depth is monitored by a mobile-connected sensor installed at the insured location and once the trigger depth is breached the claim gets paid. Cover is flexible and can be arranged to pay out different indemnity amounts at varying depths: businesses can choose a lower depth/lower indemnity limit to cater for a flood that may just result in clean-up costs and select a higher indemnity/depth for more catastrophic flood events, for example.   Communicable disease   As a result of the pandemic, communicable disease is now a firm exclusion under all policies within the traditional insurance market. However, the parametric market continues to provide an option to write back this coverage. Retailers can purchase protection with triggers such as government-mandated lockdowns, restrictions on movement, or decisions from industry standard organisations such as the World Health Organisation.   For further information, please visit the Lockton Retail Practice Group page or contact your Lockton representative. 

The retail industry is facing several emerging risks that can have a severe impact on revenues. These include changing weather patterns, supply chain disruptions, and the consequences of the digitisation of business processes.  
 
Where existing risk mitigation measures are insufficient or traditional insurance policies are unable to cover the risk, parametric insurance solutions can cover the gaps.  

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Protecting your retail business with parametric solutions 

As the avian influenza virus (bird flu) continues spreading around the globe, poultry farmers need to stay alert and remain vigilant with mitigation measures. In addition to monitoring local and regional incidence rates and closely following risk mitigation standards, poultry farmers should consider making use of insurance protection while it remains available.   Rising incidence of bird flu  The highly contagious nature of bird flu and the potential economic losses it can cause for poultry farmers makes it a critical area for risk management and preparedness.  Bird flu viruses are either high or low pathogenic viruses (HPAI and LPAI, respectively). Poultry infected with LPAI viruses may show mild signs of the disease or none at all. Infections caused by HPAI can cause severe disease and even death. Both HPAI and LPAI can spread quickly through flocks. Moreover, certain LPAI viruses can mutate into highly pathogenic strains, which is why it is important that outbreaks are managed promptly.   Infected birds can shed bird flu in their saliva, nasal secretions, and faeces. Susceptible birds become infected when they have contact with the virus as it is shed by infected birds. They also can become infected through contact with surfaces that are contaminated with the virus. Wild birds are natural hosts and reservoirs for all types of bird flu, so play a major role in the evolution, maintenance and spread of these viruses.  The last quarter of 2024 saw an increase in cases of bird flu in wild and domestic birds compared to the previous quarter in Europe, according to the European Food Safety Authority (EFSA). Most of the detections in both wild and domestic birds were found in South-Central Europe, mainly in areas with a high concentration of poultry farms. This suggests that the large number of farms in these areas and the type of poultry production contributed to disease spread between farms.   Meanwhile, authorities in the US have reported a significant surge in cases among cattle, with more than 800 establishments affected in 16 states. The virus was also recently found in batches of raw milk sold in retail shops in California. Additionally, a different virus strain was detected in pigs for the first time in Oregon, in a mixed livestock-poultry farm. This is of concern, given the potential for pigs to be co-infected by different types of influenza viruses that could adapt and spread to other species.   Key risk factors for bird flu  Among the factors that can heighten the risk of bird flu outbreaks are:  Proximity to wild bird habitats – farms near wetland areas or migratory bird pathways are at higher risk  Biosecurity lapses – inadequate farm hygiene and failure to enforce biosecurity protocols increase the likelihood of disease spread  Climate change – altered migratory patterns due to climate change may increase the risk of new strains being introduced to farms.  Supply chain disruptions – delays in culling, testing, and restocking lead to longer recovery times for affected farms  The direct impact of an outbreak is substantial. Farmers face the immediate cost of culling infected flocks, lost revenue from egg and meat production, and potential trade restrictions. Indirectly, outbreaks of bird flu can lead to long-term reputational impacts on local, regional, or national food exports, and heightened regulatory scrutiny. Exposed parties may see increased insurance premiums, since insurers that underwrite business interruption and livestock mortality policies experience significant claims exposure during an outbreak. Regulators often impose movement restrictions during outbreaks, causing operational bottlenecks that affect supply chains.  Mitigating the bird flu risk  Managing the risk of avian flu requires a proactive, multi-layered approach that combines prevention, preparedness, and response. Key strategies include:  Enhanced biosecurity measures – disinfection points for vehicles, restricted access to poultry sheds, and personal protective equipment for workers  Wildlife management – reducing farm exposure to wild birds through the use of nets, covered feed areas, and other deterrent measures  Monitoring and surveillance – early detection is crucial, and farms should implement regular testing and collaborate with local, regional, and national government to receive timely alerts about outbreaks  Insurance and financial protection – comprehensive insurance coverage, including business interruption and livestock mortality, provides a financial buffer against the impact of an outbreak  Contingency planning – farms should develop outbreak response plans, including protocols for rapid culling, disposal of infected stock, and resumption of operations.  Biosecurity checklists for poultry and captive bird keepers are available from both the UK Animal and Plant Health Agency and United States Animal and Plant Health Inspection Service. To understand the risk exposure of a farm, potential entry points for the virus, and develop a strategy to prevent an outbreak, farmers should first make a risk assessment of the premises, ideally taking advice from a risk professional or an insurer. Tackling the growing risk of bird flu for farms will require a collaborative approach involving farmers, insurers, policymakers, and the wider agricultural sector.  Enhance resilience with insurance solutions  In the event of a bird flu outbreak, the government authority responsible for agriculture will, almost certainly, order the slaughter of all birds at an infected farm, and possibly farms in close proximity, in order to mitigate the risk of spread of the virus. Compensation is likely to be available for the direct cost of the birds affected, and potentially to cover the associated clean-up costs. However, this compensation will not cover any ensuing business interruption losses while business returns to full operations.  A Commercial Livestock Avian Influenza Insurance policy is intended to provide a degree of indemnity for this loss of revenue. Insurance solutions can provide cover for the cost of livestock losses, clean-up, and business interruption. In addition, insurers may be able to assist with emergency response, culling protocols, and claims processing in case of an event. By aligning insurance coverage with risk reduction measures, farms may also be able to reduce premium costs while enhancing resilience.  Farmers looking to secure insurance protection against a bird flu outbreak should note the following:  Bird flu cover is limited and not readily available in all regions given severity of potential losses.  Cover is often sub-limited to provide a proportion of the full limit (a means for insurers to limit their exposure, given the large potential losses associated with bird flu).  Insurers will request information before providing cover, such as the number of birds in each location and the number of farms in the vicinity. Underwriters will combine this with broader outbreak data to calculate the risk of cross infection. Underwriters will also want to see evidence of adherence to bio security protocols.  Insurers look more favourably on known clients and policyholders (i.e. those with whom they have an existing relationship). We therefore suggest that policyholders take out a livestock insurance policy that covers the livestock in the event of death by an insured peril.  Once a bird flu outbreak has occurred, it is far more difficult to obtain cover. As a preventative measure, we advise taking out bird flu cover before an outbreak occurs.  If bird flu is already present in your region, holding an existing livestock insurance policy will put you in a better position to obtain a bird flu insurance top-up.  Many governments require suspected cases of bird flu to be reported to a relevant authority. Online resources are to monitor outbreaks of bird flu, which may help to assess the current risks to a farm or flock:   In the US, via the Centers for Disease Control and Prevention.   In the UK, via the Animal and Plant Health Agency.  In the EU, via the EURL Avian Flu Data Portal.  For further information and help securing cover, please contact a member of our Livestock team. 

As the avian influenza virus (bird flu) continues spreading around the globe, poultry farmers need to stay alert and remain vigilant with  mitigation measures. In addition to monitoring local and regional incidence rates and closely following risk mitigation standards, poultry farmers should consider making use of insurance protection while it remains available. 

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Bird flu: mitigating the risk of disease outbreak and spread

While global sentiment may be subdued in some sectors, there is a lot of excitement about data centers. Demand for data center capacity is expected to grow rapidly in coming years, driven not only by customer demand but also by the rapid rise of artificial intelligence (AI) advancements. To meet this demand, AI data center capacity is conservatively projected to experience a compound annual growth rate (CAGR) of 40.5% through 2027, according to estimates from the International Data Corporation.  Data centers need to meet and exceed exacting standards from often demanding customers, both during construction and the data center's operational life. Whilst there is much positive pressure on developers to deliver these increasingly large and complex construction projects quickly; quality and reliability are cornerstones of every customer requirement.  Owners may face significant financial consequences should they not meet the ‘Ready For Service’ date or the standards they have agreed with their customers. Risk management, which includes engaging with the global insurance market, must therefore be a key consideration. The global insurance market has rightly identified technology and digital infrastructure as an area of focus for both capacity and IP deployment.  Engaging with insurers effectively will create opportunities to secure good terms for transferring risk from investors' and owners' balance sheets to insurers.

We have specialized expertise and extensive experience in these industry sectors and can provide comprehensive advice and negotiate innovative solutions with insurers to suit your specific needs.

In this document our specialists discuss data center risk considerations for every stage of a project, from planning and construction through to a potential sale, including recommendations for mitigating these risks. Click here to learn more.

While global sentiment may be subdued in some sectors, there is a lot of excitement about data centers. Demand for data center capacity is expected to grow rapidly in coming years, driven not only by customer demand but also by the rapid rise of artificial intelligence (AI) advancements. To meet this demand, AI data center capacity is conservatively projected to experience a compound annual growth rate (CAGR) of 40.5% through 2027, according to estimates from the International Data Corporation.



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Data centers: Protecting projects across the life cycle

Fixed fire protection systems (FFP) such as sprinklers are one of the most effective ways to prevent a major fire loss to a property or business enterprise. Commonly recommended by property insurers, systems can detect a fire in its initial stages and deliver a fire-fighting agent where it is needed, reducing the risk to people, property and the environment.  To ensure the maximum benefit from the investment in fire protection, it is important systems are designed and installed to meet insurer and other stakeholder needs. This Inside Risk edition explores the main considerations when selecting fire protection systems. Why consider fire protection systems? FFP can be specified and installed for a variety of reasons including life safety, property protection and to improve business resilience in the event of a fire. Compliance with life safety regulations does not automatically ensure an enterprise’s resilience to fire or other perils. Insurers and businesses can look beyond regulatory compliance to encourage a fire strategy which also protects the property. Businesses can benefit from a well-designed fire strategy through smaller property damage loss estimates (in normal conditions) and / or improved fire risk quality ratings during insurance assessments - these can positively impact factors such as premium, capacity or underwriter appetite.  Where should fire protection systems be installed? Broadly speaking, FFP should be considered wherever combustible construction or combustible occupancy is present. However, there are a wide range of additional considerations: Potential fire hazards  Building construction features  Potential loss to property and business from a large fire The criticality of business operations and any business continuity options available Environmental considerations Practicability of installation (retrofitting systems into an existing building can introduce additional costs, compared to a new build) FFP can be installed in a range of applications to provide: Building protection (such as providing sprinklers throughout a facility) Compartment protection (such as installing specific protection in an IT or utility room) Local protection (such as installing protection to a specific item of equipment such as a printing machine) Building protection provides the most extensive coverage, reducing ‘normal’ loss estimates. Compartment or local protection can also be considered to provide an additional level of protection to specific hazards (such as in-cabinet protection to critical electrical panels) or where building protection is not practicable or technically feasible.  It is important to note that FFP technologies do not necessarily extinguish the fire. Some systems are designed to control or suppress a fire, limiting its size and providing time for the responding fire brigade to arrive and conduct final extinguishment. As such, a robust approach to provide manual fire water and access to extinguish the fire is also required as part of the fire strategy.  What type of fire protection should be installed? There are many different FFP technologies available, each with their own applications, advantages, and limitations. Some common systems include: Sprinkler systems Well-established water-based technology recognised to provide robust property protection by controlling or suppressing a fire. To do so it uses sealed sprinkler heads which operate based on heat released locally from a fire.  Some sprinkler systems such as residential sprinklers are installed for life safety purposes and may not be considered sufficient for property protection purposes. Deluge systems Water-based technology using open delivery nozzles to discharge water (or foam) to a specific area simultaneously. It’s typically used in high-hazard environments such as chemical plants, storage tanks or transformers.  Water mist Water-based technology providing finely divided droplets of water to suppress or extinguish a fire. Such systems may be designed for local, compartment and potentially building protection but generally need to be based on full scale fire testing to demonstrate performance. Foam Foam systems provide a foam blanket to seal off vapour generation and cool the fuel. They are used for specific hazards such as where ignitable liquid is stored, processed, or transported. There are wide ranges of different application methods which can deliver very low, low, medium and high expansion foam depending on the situation.  Foams containing fluorine products are currently being phased out for environmental reasons and existing foam equipment may require replacement or upgrading for use with non-fluorine-based foams. Gaseous fire suppression Gaseous systems could be either inert gases (which reduce the concentration of oxygen through dilution and displacement) or chemical gaseous systems which remove the heat from the fire though chemical reaction. Such systems are typically used for compartment protection.  Carbon dioxide is another gaseous fire suppression option, functioning in a similar way to inert gases. It can be quickly lethal to humans, requiring strict controls for health and safety risks.  Kitchen systems Designed specifically for kitchens, these systems deliver wet-chemical agents to cooking equipment such as deep fat fryers, cooking ranges, grills, and extraction hoods. The agent reacts with the burning oils and greases to form a soapy layer to extinguish the fire. Systems can be interlocked to isolate fuel supply on activation. Oxygen reduction systems (ORS) ORS are a technology which reduces the oxygen concentration within a specific area to reduce the likelihood of ignition and fire. They are not considered a fire suppression or extinguishing system but use an ‘inerting’ approach to help prevent ignition. The selection of the oxygen concentration is an important consideration to ensure the effectiveness of the system. Selecting a fire protection solution When considering FFP options, engage early with your broker and insurer for property risk control advice and use fire protection companies who provide a wide range of FFP solutions to help identify the most appropriate system for the specific application.  During the process also consider: Recognised standards: Select an appropriate property protection standard or guideline in collaboration with your broker/insurer for the design and installation. Common examples include NFPA codes, FM data sheets and LPC Sprinkler Rules.  Independent third-party certification: Seek suppliers, products or systems which have a third-party certification recognised by property insurers to demonstrate suitable standards have been applied.  Approvals: Seek the use of approved equipment such as UL, FM, VdS or LPCB. Plan review: Engage with your broker, insurer, or risk engineering provider for plan review of proposed installations. Environmental sustainability: When assessing FFP options, consider the environmental features of the proposed technology and the ongoing supply of replacement parts and extinguishing media.  Considerations following installation and commissioning: Systems should be implemented following commissioning to ensure FFP remains available, reliable and adequate throughout its working life. A fire protection impairment programme can help sites to identify, manage and notify situations where fire protection is not in service. Inspection, testing and maintenance programmes (such as in accordance with NFPA 25) help ensure systems remain reliable and operate when needed. Management of change processes can help ensure fire protection systems remain adequate, ensuring any planned changes do not compromise installed fire protection.  Fixed fire protection systems are an effective way to reduce the risk of a large fire, the impact of a fire on the environment and to improve property risk quality. A suitable technology should be selected, designed, installed, and maintained to ensure the system remains available, reliable and adequate to deliver when it is needed.  A series of Active Fire Protection Guides have been prepared by RISCAuthority providing information on the main types of fire protection technologies available.  For further information, please contact a member of our team or visit the Lockton Risk Control page.

Fixed fire protection systems (FFP) such as sprinklers are one of the most effective ways to prevent a major fire loss to a property or business enterprise. Commonly recommended by property insurers, systems can detect a fire in its initial stages and deliver a fire-fighting agent where it is needed, reducing the risk to people, property and the environment.  
To ensure the maximum benefit from the investment in fire protection, it is important systems are designed and installed to meet insurer and other stakeholder needs. This Inside Risk edition explores the main considerations when selecting fire protection systems.


Engineer checking Industrial fire control system,Fire Alarm controller, Fire notifier, Anti fire.System ready In the event of a fire.

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Inside Risk: selecting fire protection systems

Prices in voluntary carbon credit markets have declined broadly, but there is growing evidence of price differentiation based on quality attributes. This suggests the market is maturing in how it values carbon credits beyond traditional pricing. Voluntary carbon markets allow carbon emitters to offset their unavoidable emissions by purchasing carbon credits. These are generated by projects removing or reducing greenhouse gas (GHG) emissions from the atmosphere. The voluntary carbon credit market trades certified and transferrable instruments representing the avoidance or removal of one metric tonne of CO2 or equivalent GHG. It has recently faced a credibility crisis due to allegations that many credits don’t deliver the emissions cuts they promise. Two studies have pointed to systemic problems with credits generated from nature-based projects. In January 2023, a report assessed credits certified by Verra, a leading carbon standard. The analysis found that more than 90 percent of their forestry credits did not represent real emissions reductions. In August 2023, a study in Science concluded that forestry programmes significantly overestimated their prevention of deforestation. The revelations not only suggested that the investment generated no return but also exposed businesses purchasing carbon credits to the risk of greenwashing allegations and potential reputational damage. As a result, sales slumped dramatically in 2023 and 2024, creating an oversupply of credits that are perceived as low quality.  Source: Carbon Credits, 28.11.24 Initiatives to improve market conditions Market participants have reacted to the challenges the voluntary carbon credit market is facing, and a number of international initiatives promise to address shortcomings and strengthen confidence: Voluntary Carbon Markets Integrity (VCMI): The VCMI, established in 2021, is setting principles and frameworks for high-quality carbon credits. Integrity Council for the Voluntary Carbon Market (ICVCM): The ICVCM, established in 2021, aims to enhance the overall efficiency and effectiveness of the voluntary carbon market. Global Carbon Market Utility (GCMU): Launched at COP27 in 2022, the GCMU aims to enhance the quality and transparency of carbon credits and to scale the global carbon market. International Sustainability Standards Board (ISSB): The ISSB’s first climate disclosure standards, published in 2023, encourage greater transparency and accountability, and enable a more informed comparison of the performance of companies. In addition to the work that these institutions are doing, there are a number of further initiatives that could contribute to improve conditions in the voluntary carbon credit market. On 20 September 2024, the Commodity Futures Trading Commission approved final guidance regarding the listing for trading of voluntary carbon credit derivative contracts. It outlines factors for designated contract markets to consider when listing for trading of voluntary carbon credit derivative contracts. Furthermore, at COP28, six of the largest independent crediting programmes, including Verra, Gold Standard, and the Global Carbon Council, agreed to collaborate and better coordinate their approaches to certification. Aligning standards could also improve the efficiency and efficacy of auditing projects and crediting schemes. In addition, there is a longer-term trend developing in which governments are taking larger roles in designing, moderating, and, to a limited extent, regulating voluntary markets. Many governments have set CO2 emissions goals for their countries and the voluntary CO2 credit market can help them achieve these goals. Their involvement can help setting expectations for the supply side of the market. Establishing standards for quality  The carbon credit quality primarily refers to the confidence that a carbon credit represents genuine, additional, and permanent emission reductions or removals. The ICVCM has developed Core Carbon Principles defining key quality criteria that help assess the quality of projects generating carbon credits. Below is a summary: The project needs to deliver measured, monitored, and verified emission reductions The reductions need to go beyond what would have occurred without the project The result needs to be set on realistic baselines The reductions need to be either permanent or include comprehensive risk mitigation mechanisms Any leakage needs to be accounted for and minimized The CO2 effect can only be counted once The project should not create a net harm Attributes of projects that signal quality include: Vintage Newer credits, typically less than five years old, are often viewed as higher quality. This is because they are likely to reflect latest methodologies and measurement techniques and be based on most recent baseline calculations. Project type (removal vs. avoidance) Carbon removal projects, which actively remove CO2 from the atmosphere, are often valued higher than avoidance projects (which prevent emissions) because: They deliver more permanent and measurable carbon reductions Have clearer additionality claims Are easier to verify and monitor Align better with net-zero goals Verification standard  Higher quality is indicated by: Use of internationally recognized standards (e.g., Gold Standard, Verra VCS) Regular updates to methodologies Transparent verification processes Independent third-party verification Monitoring methodology Quality is demonstrated through: Real-time monitoring systems Digital monitoring, reporting, and verification) Satellite imagery for nature-based projects Blockchain or IoT integration for data integrity Co-benefits (e.g. sustainable development goals’ impacts) Projects delivering multiple sustainable development benefits beyond carbon reduction are considered higher quality because: They contribute to multiple UN sustainable development goals Create local community benefits (jobs, education, healthcare) Protect biodiversity Enhance project permanence through community buy-in Corresponding adjustments (accounting mechanisms that prevent double counting of emission reductions) Ensure credits are only claimed once Adjust national inventories when credits are transferred Align with Paris Agreement Article 6 requirements Provide transparent tracking of credit ownership Geographic location and jurisdiction Quality indicators include: Political stability of host country Robust environmental regulations Clear land tenure rights Strong governance frameworks History of successful project implementation Project developer track record Quality can be assessed through: Years of experience in carbon markets Success rate of previous projects Financial stability Transparency in reporting Community engagement history Professional certifications and accreditations Verification body reputation Quality indicators include: Accreditation by international bodies Length of experience in carbon markets Independence from project developers Technical expertise in specific project types Track record of identifying non-compliance Reducing the invalidation risk Adhering to established quality standards when selecting the carbon credits will substantially lower the risk of them being invalidated. Higher quality credits with robust measurement, reporting and verification (MRV) are less likely to face methodological challenges and credits with corresponding adjustments will reduce the double counting risk. In addition, projects with strong community engagement have lower reversal risks as they are likely to also ensure higher quality for a number of reasons:  Local support ensures long-term project viability Community benefits create incentives for project maintenance Local knowledge can improve project design and implementation Reduces the risk of social conflicts or project reversal Better monitoring and early problem detection Enhanced protection against illegal activities In general, better baseline methodologies are likely to reduce additionality challenges, but despite a robust risk assessment, the risk of carbon credits being invalidated cannot be eliminated completely. Carbon credit insurance can protect buyers from unforeseen losses and unavoidable risks, providing financial compensation for carbon credit losses. Before offering a quote, underwriters will make their own assessment of the project. Among the aspects they will assess are: Physical risks (e.g., forest fires, natural disasters) Political risks (e.g., policy changes, ownership rights) Methodological risks (e.g., baseline calculations, MRV processes) Project developer risks (experience, track record, funding source) Jurisdictional risks (legal framework, governance, and historical reputation) The insurance market is constantly evolving to keep pace with new technologies applied in projects as well as the protection needs of clients. As a result, new insurance products are emerging for specific risks. These are targeted at a variety of stakeholders – apart from CO2 credit buyers they may help reducing the risks for lenders, developers, traders, or buffer pools. Some insurers also offer replacement credits if projects fail to deliver.  Insurance proposition Insurers offer pre-agreed financial indemnity limits or replacement credits if projects fail to deliver. The coverage can include both physical and political risks. Premium prices will reflect project quality attributes. For further information, please contact your Lockton representative or visit the Lockton Carbon Credit Insurance page. 

Prices in voluntary carbon credit markets have declined broadly, but there is growing evidence of price differentiation based on quality attributes. This suggests the market is maturing in how it values carbon credits beyond traditional pricing.

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Beyond price: rethinking carbon credit value in the voluntary market

Driven by economic uncertainty, geopolitical instability and rapid technological advances, the directors’ and officers’ (D&O) risk landscape is undergoing significant change. This article offers useful insights for board-level decision-makers seeking to understand this volatile landscape. An uncertain economic outlook Economic uncertainty has emerged as a dominant concern for business leaders globally. A recent Beazley survey shows that one in four global business executives ranked economic uncertainty as their top geopolitical and economic risk in 2024.  The years following Covid-19 have seen the emergence or amplification of a range of economic challenges. Governments’ withdrawal of pandemic-era financial support has led to a surge in bankruptcies, particularly in sectors like retail and construction. Labour market shifts, inflation and the escalating costs of energy and commodities have further complicated the outlook. These pressures are straining corporate resources and increasing the risk of D&O claims, particularly in cases of financial distress or insolvency. For boards, this underlines the need for robust scenario planning and contingency strategies. Preparedness is not just a matter of ensuring organisational resilience. It is also critically important to improving your risk profile and influencing how your organisation is viewed by underwriters. Companies that can demonstrate proactive risk management are best positioned to secure favourable terms at their D&O renewals. Geopolitical instability and shifting regulation Global tensions, from trade disputes to national elections, are layering complexity on an already fraught D&O landscape. Trade tensions have disrupted investment strategies and supply chains, delayed IPOs and constrained capital-raising efforts, further exacerbating financial vulnerabilities. A record year of elections, in the US, the UK, France and India among many others, are introducing fresh regulatory uncertainties with potential knock-on effects on trade policy, economic stability and consumer confidence. Boards need to consider how a raft of resulting changes are likely to impact their operations. Understanding regional indemnification provisions, ensuring appropriately structured multinational insurance programmes, and maintaining clear claims protocols are essential steps in mitigating risk. A rising tide of insolvencies Insolvencies are on the rise globally, with more than two thirds (67%) of defence counsel surveyed in the Inigo 2023 Defense Counsel Survey saying they have seen an increase in bankruptcy filings. This trend has significant implications for D&O insurance, particularly in relation to Side A coverage, which protects individual directors when a company cannot indemnify them.  Senior executives need to review the structure of their D&O policies on a regular basis, ensuring that these continue to make appropriate provisions for both company balance sheet protection and robust Side A coverage. Companies should conduct scenario-testing, considering varying regulatory environments and potential claim triggers, to provide a clear roadmap for handling claims in real-life scenarios. Climate-related risks and the challenge of ESG Environmental, social and governance (ESG) factors are reshaping the corporate and insurance landscape. Scope 3 emissions, which stem from supply chains, present a significant challenge for companies striving to meet climate transition goals. This is particularly the case given widespread concerns around the reliability of data supplied by supply chain entities. Meanwhile, regulatory scrutiny of greenwashing is intensifying globally, with notable cases brought recently involving securities claims and substantial damages. Boards need to integrate climate-related risks into their strategic planning. Accurate data collection, scenario testing and transparent disclosures are critical to addressing both regulatory expectations and stakeholder concerns. Highlighting how a board oversees and communicates ESG challenges, rather than simply detailing what actions are taken, can bolster credibility with insurers and investors. Focusing less on lofty longer-term ambitions that may be dependent on technologies not yet generally available, and more on shorter-term practical deliverables can be looked upon favourably by underwriters assessing a board’s exposure to ESG-related lawsuits. The rapidly evolving nature of ESG litigation underscores the need for continuous adaptation. While US-based defence counsel have noted fewer ESG-specific claims, regulatory changes like the Securities and Exchange Commission’s (SEC) new guidelines indicate increasing scrutiny. Boards need to keep themselves well-informed on current and future regulatory developments, particularly in regions like Europe and California, where more demanding sustainability reporting standards are emerging. AI: a disruptive force Artificial intelligence (AI) is transforming almost every industry and emerging as a potentially significant driver of D&O claims. Allegations of AI washing, where companies falsely claim to be using AI (or exaggerate their claims) to boost investor confidence, have already led to securities class actions and regulatory fines. The operational risks associated with AI, including data privacy breaches and decision-making errors, also amplify potential liabilities. Staying competitive requires embracing AI, but doing so without proper governance can lead to reputational damage and legal exposures. The many ways in which poorly planned or executed AI use could come back to harm[DS1] an organisation have yet to fully come into focus. But these are likely to include: Flawed decision-making based on input from AI, with its now well-recognised propensity for ‘hallucinations’; Inappropriate use of open-source AI tools; and The risk of data privacy breaches or leakage of intellectual property (IP). Establishing specialist committees, recruiting board members with genuine AI expertise and carefully documenting governance processes are all essential steps in mitigating risks. Communication is equally critical. Boards should be able to articulate clearly how AI is integrated into their business strategies, emphasising benefits like cost savings and enhanced efficiency, while fully addressing operational and compliance risks. Transparency with regulators, insurers, investors, and other stakeholders fosters trust and demonstrates accountability. Emerging legal trends A marked recent rise in collective actions, particularly in the UK and Europe, represents a significant shift in the legal landscape. An increasingly active litigation-funding sector and rising settlements are placing new pressures on D&O policies. Combined with escalating legal fees, these trends could lead to a rise in claims that erode multiple layers of coverage. Boards need to anticipate these developments by strengthening governance frameworks and ensuring adequate policy limits. Collaborating with insurers to refine claims protocols and align on preferred legal counsel can streamline the response to complex claims. Regular reviews of policy language and triggers will also help address gaps and ambiguities that could subsequently complicate claims. Recommendations Corporate boards face an increasingly complex web of risks. Economic uncertainty, geopolitical instability, ESG challenges, AI disruption, and legislative and regulatory developments all demand focused attention and strategic action. Proactive engagement with underwriters, robust scenario planning, and transparent governance are key to mitigating these risks. Investing in expertise, whether through external advisors or board appointments, is critical to addressing these emerging challenges. From navigating climate-related disclosures to managing AI risks, the ability to adapt and innovate will make the difference between more and less effective corporate governance in the years ahead. With foresight and resolution, and the right insurance partners, boards can effectively safeguard their organisations and senior managers, while maintaining resilience in a rapidly evolving landscape, addressing current risks and anticipating the challenges of tomorrow. For further information, please visit the Lockton Management Liability page.

Driven by economic uncertainty, geopolitical instability and rapid technological advances, the directors’ and officers’ (D&O) risk landscape is undergoing significant change. This article offers useful insights for board-level decision-makers seeking to understand this volatile landscape.

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Navigating a turbulent D&O insurance landscape

The use of photovoltaic (PV) systems to generate clean sustainable energy is well established within the built environment, with installations becoming more of a ‘norm’, rather than an exception. However, the installation of PV systems to a building can introduce new hazards which may increase the likelihood or severity of a loss. Data obtained by The Independent in 2023 indicates a rise in the number of fires involving solar panels, with six times the number in 2022 compared with 10 years earlier.   Such losses are not restricted to residential buildings and can also impact commercial properties.  An example being a fire in a 45,000 m2 commercial warehouse in Peterborough, UK, in Feb 2024, requiring over fifty firefighters to bring the blaze under control.   It is important, therefore, to ensure robust property protection principles are adequately considered throughout the full project lifecycle of a PV system to ensure any hazards are identified, assessed, and controlled.  PV Systems  PV systems consist of semiconductor materials encapsulated by glass and a polymer/glass backing, which generate direct current (DC) when exposed to sunlight. An inverter is used to convert this power to alternating current (AC) current for practical use by the facility or transferred to the grid when power exceeds use. Systems are typically ground mounted (generally preferred by property insurers) or roof mounted secured with mechanical fixings or ballast.   Common property hazards to be assessed when considering the installation of roof mounted PV systems include:  Fire  PV systems introduce new electrical components such as wiring, invertors, control equipment as well as the PV panels themselves. These components can be subject to failure, damage, or heating, increasing the risk of fire. Systems can also be damaged from external fire exposure.  Windstorm  PV systems can be damaged from wind or other debris if not adequately designed/installed.  Hail  PV systems can be damaged from hail exposure if sufficient resistance is not provided.  Snow / rain  Roof damage can result from excessive load of snow/rainwater combined with the weight of the PV system.  Earthquake  PV systems can move in the event of seismic activity resulting in damage and the potential for fire.   The installation of a PV system can introduce new components which may increase the likelihood or severity of a loss. Examples influencing the likelihood include:  Electrical wiring faults (loose, damaged, or inappropriate connectors). Connectors are reported to be a common source of PV system fires. A 2017 study identified PV DC connectors, inverter and DC isolators accounted for 84% of PV system related fires.   Overheating or failure of PV modules or inverters  Examples influencing the severity include:  The PV system altering the fire behaviour of the roof, increasing the spread of fire and/or restricting firefighting efforts.  A PV system fire damaging the roof cover resulting in firefighting water entering the building damaging equipment and stock below.  PV system design approach  A range of property protection guidance for the design, installation and management of roof mounted PV systems is readily available. Such guidance may sometimes exceed requirements of local building regulations. However, the implementation of robust property protection principles reduces the likelihood of a large loss, improves business resilience, and should be considered more favourably by property insurers.   Example guidance includes:  NFPA Codes including NFPA 70, National Electrical Code, NFPA 70B, Standard for Electrical Equipment Maintenance, NFPA 1, Fire Code  FM Property Loss Prevention Data Sheet 1-15: Roof-Mounted Solar Photovoltaic Panels  RISCAuthority. RC 62:  Recommendations for fire safety with PV panel installations  Zurich Resilience Solutions — Photovoltaic (PV) systems on buildings  Consult your broker and insurer at an early stage to agree on an acceptable solution for all stakeholders.  A key consideration is the planned location of any roof mounted PV system. Carefully consider existing or proposed roof construction materials, penetrations, and equipment, avoiding installation on combustible roof systems.  Thermal barriers can help mitigate the influence of an existing combustible roof structure in some circumstances. Other considerations include the age and condition of the existing roof (it is harder to repair or recover a roof once a PV system has been installed) and avoiding installation of PV systems on roof areas over high value or business critical operations which may be susceptible to water damage.  The development of a corporate policy on the design, installation and management of PV systems helps guide implementation of best practice throughout the lifecycle of the installation, including:  Concept:  Identify and agree best practice principles to guide the suitable location of PV systems (including roof upgrades where needed), suitable structural analysis of roof areas, identification and mitigation of hazards (both fire and natural hazards), review and suitability of electrical infrastructure and selection of suitable contractors.  For example, those accredited to a national trade body and working to suitable standards. In the UK this might include the MCSCertification Scheme Requirements or UK BS 7671 IET Wiring Regulations 18th edition or later.  Design:  Apply local building, electrical and fire codes in addition to the property protection principles agreed with your broker/insurer. Select suitable PV components and protection systems such as fire detection, surge protection, plus fire control/suppression and lightning protection where needed.  Installation:  Ensure installation work is conducted in accordance with suitable requirements such as the MCS and IET PV Code of Practice in the UK. Ensure the installation is conducted in accordance with the design, utilising an appropriate quality assurance process and representative.   Operation:  Ensure inspection, testing and maintenance of the PV system is conducted in accordance with local requirements and manufacturers guidelines. Ensure any changes are controlled through a management of change process.  Planning for emergencies:  Update the site emergency plan to include events involving the PV system and associated components. Ensure drawings are updated with key information including location of PV systems, isolation points, access, and fire water supplies. Collaborate with the local fire brigade, sharing information and developing pre-fire plans.   The documents referenced above provide additional guidance.   With the ongoing focus on clean energy, the installation of PV systems will continue to grow. There are positive aspects to such systems, but the potential risks need to be considered and managed. For further information, please visit the Lockton Risk Control page, or contact your broker or insurer.  

The use of photovoltaic (PV) systems to generate clean sustainable energy is well established within the built environment, with installations becoming more of a ‘norm’, rather than an exception. However, the installation of PV systems to a building can introduce new hazards which may increase the likelihood or severity of a loss. 

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Inside Risk: Mitigating the risks of roof mounted photovoltaic systems 

Welcome to the October 2024 edition of Lockton’s London Market Report We are pleased to introduce the first edition of Lockton’s Specialty London Market Report. The Specialty Division was formed 18 months ago to provide Lockton’s retail network and clients across the globe with support and advice from the full breadth of London’s Specialty teams. This report provides insight from our Specialty teams into changing market conditions, shifts in risk appetite, new market entrants, and key trends across all Specialty markets. We hope you’ll find this update insightful and that it can serve as a basis for further conversations with our Specialty teams. We are particularly pleased to introduce you to our new Space, Offshore Energy Projects and expanded US Casualty offering. We will produce updated versions of this report on a regular basis in addition to separate, more detailed 'industry vertical' reports. If you have any questions or feedback, feel free to reach out directly to us or the relevant subject matter experts whose contact information you will find on the respective pages.     Blake Roseveare, Specialty Lead / Carl Moore, Chair of Specialty Please click here to view the full report

We are pleased to introduce the first edition of Lockton’s Specialty London Market Report. The Specialty Division was formed 18 months ago to provide Lockton’s retail network and clients across the globe with support and advice from the full breadth of London’s Specialty teams.

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London Market Report October 2024

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The Unintended Consequences of Sustainability

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How to trace your lost pensions

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Cyber threats in the healthcare sector: The importance of digital health

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Employee Wellbeing: The key to success in the future of work

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