In this chapter of our Annual Insurance Review 2022, we look at the main developments in 2021 and expected issues in 2022 for the Netherlands.
A look back at 2021
Property & BI
The new model for bourse conditions for Property & BI policies is released this year. These VMZB 2021-conditions (and matching schedule and clarifying document), that are intended to replace the commonly used NBZB and/or NBUG (both dating from 2006), can already be found on the VNAB website in Dutch here. One of the key changes is that the VMZB 2021 are of a modular design/structure, with separate modules for physical loss and BI, in line with current market practice and needs (also re automation). Further, the language has been adapted to normal language use anno 2021. Sentences are shorter and the layout is clearer, making the conditions easier to read. And of course the conditions have been adapted in terms of content to comply with current legislation and regulations, and also to get in line with current business practices.
We have a new regime that is currently being applied/tested in practice with some 20-odd cases (and growing). Various diesel gate cases (VW, FiatChrylser, Mercedes), Oracle & SalesForce (data privacy), actions against the Dutch State (anti-conception pill, environment, ethnic profiling, fundamental rights, etc.), IP infringements, bankruptcy proceedings, Stop Online Shaming, etc.
After the UK, the Netherlands has become the battle-ground for follow-on litigations regarding EU competition law cases (i.e. damages in civil courts). We have several big cartel cases pending in the courts and are involved in one of them (Deutsche Bahn pre-stressed steel case). This flurry of cases has led to an expansion of certain courts with dedicated chambers.
We also have a very active interest group for shareholders that keep on pursuing claims against companies. Not only for lost shareholder value, but also in relation to big bankruptcy proceedings. The most interesting one is the IMTECH case, one of the biggest in the Netherlands.
A crucial part of some of these new types of litigation is litigation funding. In addition to two local funders (incl. Redbreast), other funders have flocked to the Netherlands and even started their own law firms (e.g. Hausfeld). We also see US firms moving into the market.
Environmental litigation is obviously one of the most interesting changes, as recently witnessed by the Shell-case. This movement got kick-started by the Urgenda case against The State from a few years ago and has no developed into a ‘movement’ of sorts where various other actors will be attacked. Also note that this seems to coincide with activist shareholders that push for greener companies from within (again, Shell is a good example). Note that the majority of these cases do not involve damages, but court orders to ensure compliance with climate targets.
As (major) insolvencies caused by the COVID-19 pandemic did not emerge in the scope we expected in the Netherlands, D&O insurers did not receive COVID related claims in the magnitude they feared. This fear however, did cause a further hardening of the D&O market. Prices (again) rose drastically, not just because of COVID, but also because of scarcity in capacity and new risks such as cyber and climate change related claims.
Looking forward to 2022
Now that we know that there is no quick way out of the pandemic, specific sectors still face greater insolvency risks and inherent risks of D&O claims. We also see an increasing social pressure on corporations to take their responsibility in ESG issues. A group of legal professors opted to include this corporate responsibility in the Dutch Civil Code. In the current system, D&O’s are obliged by law to act in the interest of the company. The interest of the company is however, in the end, aimed at maximalisation of profit. The group of legal professors argue that this focus on profit is damaging to society and therefore opt to include an obligation for directors to act not only in the interest of the company, but to also make sure the company acts as a responsible citizen. Whether ESG responsibilities will in fact be included in the Dutch Civil Code is yet to be seen, but we do already see that civil courts take such responsibilities into account in their assessment of claims. The Shell Climate case is an example of this. Insurers fear that this trend of activistic litigation will lead to D&O claims in the (near) future.
Insurability of climate change damages
The Authority for the Financial Markets (AFM), the Dutch conduct supervisor for Dutch financial enterprises and financial service providers, issued a report on climate change related losses getting more and more uninsurable in the Netherlands, and the need for insured parties to be aware of that. The report focuses on consumers, but also has relevance for the business (co-)insurance market. The report itself, and a short introduction to it, can be found (in Dutch) on the AFM website: Schade door klimaatverandering steeds vaker onverzekerbaar | oktober | AFM Professionals
In summary, the AFM urges insurers to clearly inform policyholders/insureds on increasing cover limitations as a result of climate change. In addition, AFM also suggests to both insurers as well as the Dutch government to take appropriate action to encourage insurability of climate risks in the future, including the option of mandatory insurance or the creation of collective (re-)insurance pools.
Written by Marit van der Pool & Peter van den Broek.
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