InView Spring/Summer 2016

Spring/Summer 2016 Issue 3
BREXIT POLL PUTS UK
INSURERS ON TENTERHOOKS
The risk of a Brexit from the European Union is
causing intense concern among insurance industry
leaders. Former Solicitor General Sir Oliver Heald
MP QC explains why.
WHY THE WORLD’S
POLITICAL STAGE IS A
HIGH-RISK MARKET
In a geopolitical environment that has never been as
volatile, insuring against political risk has entered an
era of growing uncertainty.
UNSETTLED CONDITIONS
FOLLOW EXTREME
WEATHER EVENTS
Severe weather events seem to be happening more
frequently, with global repercussions for insurers.
ASSESSING THE RISKS
OF UK PROFESSIONALS
WORKING ABROAD
UK professionals operating overseas are facing a
greater number of claims. Patrick Gaul explains why.

2 InView | An independent eye on Insurance
CONTENTS
3
4-5
INTRODUCTION
BREXIT POLL
PUTS UK
INSURERS ON
TENTERHOOKS
The risk of a Brexit from the
European Union is causing
intense concern among insurance
industry leaders. Former Solicitor
General Sir Oliver Heald MP QC
explains why.
8-9
UNSETTLED
CONDITIONS
FOLLOW EXTREME
WEATHER EVENTS
Severe weather events,
seem to be happening more
frequently, with global
repercussions for insurers.
6-7
WHY THE
WORLD’S
POLITICAL STAGE
IS A HIGH-RISK
MARKET
In a geopolitical environment that
has never been as volatile, insuring
against political risk has entered an
era of growing uncertainty.
10-11
12-13
14-15
16-17
18
19
ASSESSING THE RISKS
OF UK PROFESSIONALS
WORKING ABROAD
UK professionals operating overseas are facing a greater
number of claims. Patrick Gaul explains why.
WHO IS IN THE DRIVING
SEAT ON THE ROAD TO
AUTOMATION?
The global race to bring driverless cars to the masses
is well underway.
VIEWPOINT
GEARING UP FOR
DRIVERLESS CARS
Driverless vehicle technology has the potential
to be a real game changer on a global level.
HIGH FLYING RETAILERS
PRESENT FRESH INSURANCE
CHALLENGES
The idea of drones flying packages direct to consumers’
homes was once pie in the sky. Not any more.
Peter Forshaw examines the implications for insurers.
CABIN FEVER –
TOXICITY IN THE AIR
While employers – and insurers – are familiar with
stress-related claims, other global risks are emerging.
STRESS:
A COSTLY EPIDEMIC
After musculo-skeletal disorders, work-related stress
is now the second most reported work-related health
problem in Europe, according to the European Agency
for Health and Safety.
20-21
MARKET WATCH
Monitoring the horizon for the latest changes in legislation.
The content of this magazine does not attempt to provide a full analysis of those matters
with which it deals, is provided for general information purposes only and is not intended to
constitute legal advice. This magazine should not be treated as a substitute for legal advice.
Weightmans accepts no responsibility for any loss that may arise from reliance on the
information in this magazine. The views and opinions expressed by authors of articles in, or
contributors to, this publication are their own and do not necessarily represent the views and
or opinions of Weightmans LLP, its Partners or employees.
22
23
SPOTLIGHT
The latest news in the world of Weightmans.
WEIGHTMANS AND THE ARTS
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
3
INTRODUCTION
Global emerging risks have a major impact
on every area of the Insurance industry.
In our latest issue of InView we cast the rule
over various aspects of this increasingly
significant trend.
We have brought together a selection of expert opinion,
covering a host of wide-ranging topics that we hope you
will find informative.
If any single issue is dominating our economic future,
it is the EU referendum on 23 June and we are grateful
to Sir Oliver Heald MP QC, the former Solicitor General,
for giving a frank and honest opinion on what a Brexit
might mean for the UK Insurance industry.
provides a thought-provoking explanation on why
drones flying packages direct to consumers’ homes
represent diverse challenges for insurers.
In other editorials, Roddy Macleod reveals why
work-related stress is now the second most reported
work-related health problem in Europe, and Jim Byard
discusses insurance issues around the alleged pollution
of airliner cabins by jet engine gases, known as aero
toxicity syndrome.
As ever, we would be delighted to receive your
feedback.
Meanwhile, the global race to bring the driverless
car to the mass market has left the starting grid.
Matthew Avery, Director of Insurance Research at
Thatcham Research, sets out the road map ahead
while Bavita Rai shares her thoughts on the latest
developments and their implications.
We also feature an interesting article by Colin Peck and
Simon Colvin on what extreme weather events mean
for insurers, while Francis Mackie casts a specialist eye
on how political risk in a volatile world can frustrate
international trade contracts.
Also included in this issue are Patrick Gaul’s insightful
views on why UK professionals operating overseas are
facing a greater number of claims, while Peter Forshaw
Kieran Jones, Partner, Insurance Director
0345 070 3851
kieran.jones@weightmans.com

4 InView | An independent eye on Insurance
BREXIT POLL PUTS UK
INSURERS ON TENTERHOOKS
The risk of a Brexit from the European Union is causing intense
concern among Insurance industry leaders. Former Solicitor
General Sir Oliver Heald MP QC explains why.
People have asked me what the implications would be for the
Insurance industry if Britain was to leave the EU. In a word my
answer is – bad.
With Britain as an EU member state, insurers can sell their
policies across a 500 million strong single market that includes
28 countries. UK insurers do this using a passporting system
that means in each of these countries they are considered to
have regulatory authority to sell their products.
The prospect of not having access to this enormous market
would represent a huge risk. If we were to leave the EU,
British Insurance firms would have to set up subsidiaries and
branches in all 28 EU countries, rather than simply selling from
the UK as we do now.
There is also a major issue from a consumer point of view.
The same dynamic would happen in reverse, so that UK
consumers who can currently buy their Insurance from
anywhere in the EU would not necessarily be able to do so.
Another implication of a Brexit is that if we were outside the
single market for Insurance we would be competing directly
with other foreign countries, including big emerging powers
such as India and China who are keen to expand in the
European market.
British insurers are seriously concerned about the impact a
Brexit situation might have on their businesses – and they
have every right to be. We would be going from the privileged
position of having direct access to 500 million consumers
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
5
to having to compete with global rivals, without any of the
advantages we presently enjoy.
Another disturbing eventuality for insurers – and indeed
anyone who supports the concept of a United Kingdom – is
that a Brexit may well trigger another Scottish referendum,
on significantly different terms.
This is because Scotland is highly likely to vote to stay in
the EU. If the rest of the UK voted to leave, the Scottish
Nationalists could cite this as a major constitutional change
against the wishes of the Scottish people. In the 2014
referendum, the Better Together campaign was able to point
out that an independent Scotland might struggle to become
an EU member because of opposition to secessionism from
countries including Spain and Belgium. With the UK no longer
an EU member, this barrier would clearly no longer apply.
The upshot of Scottish independence for the UK Insurance
industry would be a reduction in market size from the UK’s
population of 65 million to 60 million or less. Moreover, with
Scotland gone, who could say what Wales might do?
Huw Evans, Director General of the Association of British
Insurers (ABI) shares these concerns and recently said
Scotland leaving the UK represented “a real political
uncertainty for our sector” (full text can be found at
www.abi.org.uk).
North of the border, this issue was addressed by Sir Gerry
Grimstone, Chairman of Scottish insurer Standard Life, who
has at different times described it as potentially “damaging”
and “disastrous.”
The outcome of the Brexit referendum, to be held on
June 23, will be a defining moment for the whole of the UK.
The Insurance industry in particular will be hoping we can
do business as usual in the years that follow.
Sir Oliver Heald MP QC
KEY ISSUES IN THE REFERENDUM DEBATE
In the weeks prior to the referendum, the debate will
consider the following issues (in no particular order):
Cross-border trade: whilst around half of the UK’s current
trade in goods and services is concluded within the EU, if
free to conclude our own free trade deals with the EU and
other states outside the EU, will we succeed in doing so?
Gross domestic product (GDP): there are widely varying
estimates as to the possible effect of Brexit on GDP.
It is acknowledged that the full effect will not be felt for
some years.
The effect on jobs: one school of thought is that there is
little evidence to support the view that trade would fall
substantially between British business and EU consumers
and that employers would benefit from the freedoms that
could arise were we to see the removal of what some view
as inflexible working arrangements imposed as a result of
European requirements. Others foresee a scaling back of the
UK operations of foreign companies with a move into lower
cost EU countries and risks to the financial services sector
which reputedly employs 2.1 million people in the UK.
Immigration: this threatens, for the man in the street voting
in the referendum, to be the dominant issue – a view
supported by recent YouGov polls.
UK sovereignty: as for immigration, this appears to be
another emotive issue. The importance of the right to take
back control and formulate our own laws will be trumpeted
by “leave” campaigners. Against this, “stay” campaigners
will point to the uncertainty as to which laws will apply
whilst we re-draw our own legislation.
With all of the above and other pertinent issues, the
background to the arguments of both sides of the
“In/Out” debate are complex and detailed.
Mike Yardley
Professional Support Lawyer
0161 214 0544
mike.yardley@weightmans.com

6 InView | An independent eye on Insurance
WHY THE WORLD’S
POLITICAL STAGE IS A
HIGH-RISK MARKET
In a geopolitical environment that has never been as volatile, insuring against
political risk has entered an era of growing uncertainty. That said, the political
risk market in London seems to be growing. Francis Mackie explains.
Unheard of several years ago, even EU member states are
now being regarded as existing or potential political risk
territories, while events in the Middle East and North Africa
continue to create social and economic upheaval, with long
term global and geopolitical tensions and ramifications.
Political risk (and contract frustration) centres around
potential government intrusion into projects, operation of
assets or, for example, contracts for commodities or services/
supply of goods.
Insurers assess and underwrite political risk primarily
based on core original factors/events described in the
acronym CEND – cancellation, expropriation, nationalisation
and deprivation.
Nationalisation and cancellation are fairly selfexplanatory,
but expropriation and deprivation
can be less straightforward.
The former involves the ‘home’ government taking
control of the company, asset or commodity supplier
with which the insured has a contract or interest.
Deprivation is where, for example, an overseas government
prevents the movement of essential supplies, or the use
of an asset, for example by issuing orders for them to be
retained in a port until an extra level of import duty has been
paid, or restricting the use of or access to an asset in certain
geographical areas. The growing use of sanctions within the
global trading community also has an impact on political risk.
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
7
Influencing behaviour
Underwriters are well versed in evaluating the many
and varied factors that can influence the behaviour of
governments in all parts of the world. Nonetheless, their
assessment and analysis is not an exact science.
Underwriters are having to be careful about the risks and
jurisdictions they cover. If the political situation changes
unexpectedly, for example after inception of the policy, they
have to grit their teeth and hope there are no adverse effects.
In a country where underwriters are cautious about the
government (i.e. the home government), it is a question of
whether to go ahead with a policy that may need to last a
number of years – and clearly much can change over that
sort of period and from when the policy was issued. As
you would expect policies have exclusions, and although
some will give cover for political violence, others have the
more usual terrorism and civil unrest exclusions. Ultimately
underwriters won’t write a policy if they consider a territory
to be too risky and in particular its home government.
High risk regions
Until relatively recently the usual high risk regions were Asia,
parts of Africa and South America. However, the financial
crash of 2008 redrew the map of political risk to include some
EU member states from the perspective of the weakness of
their economy and financial systems.
Risk is now extended to Greece, mainly because there is
the potential for failure of financial arrangements relating
to projects and assets and trading contracts as a result
of restraints on the financial system and its structure.
We also now have a new government in Portugal, which
wants a different arrangement with the EU on its austerity
programme, and Spain has recently followed as a result of
its elections which could potentially bring about further
financial instability with its knock on effects to projects and
the use of assets.
Non-EU eastern European countries have traditionally been
regarded as the more usual political risks, and especially so
with Ukraine following Russia’s annexation of Crimea and
the fighting along its eastern territories bordering Russia.
Not surprisingly there has been an increase in notifications
of potential claims in Ukraine.
This in turn has had a knock-on effect because of sanctions
imposed by the West on Russia. As a result, Russia may
respond with its own retaliatory sanctions, with a direct
impact on businesses with contracts and assets or projects
in Russia.
Mediterranean North Africa is another problematic region,
especially after political changes in Tunisia, Libya and Egypt.
In Libya, there are quite a lot of European insured contracts
and activities and companies carrying out business in the oil
and related industry sectors. The recent turmoil has meant
that contracts have been put in abeyance or withdrawn or
have been the subject of abandonment and this has had a
knock on effect with regard to financial institutions providing
funding for various projects as well as commodity supply
contracts. There has been an increase in notification of
potential claims involving Libya.
The Libyan problems triggered a number of political claims,
but they were largely subject to ‘wait and see’ periods in the
policies (usually six or nine months), during which it was
hoped the situation would right itself. Clearly it was in the
interests of insurers to extend these periods for as long as
possible so that all parties could review the situation on an
ongoing basis as to whether contracts could be continued or
had to be abandoned.
So what does the future look like for the political risk market?
There are a great many known threats out there and nobody
knows how these scenarios are going to play out.
Each one is a moving target, with underwriters continually
reassessing various jurisdictions. Sometimes they limit the
amount of risk they are prepared to underwrite, even for
insureds who are one step removed from a jurisdiction, such
as finance providers for businesses with contracts in risky
territories. We are very much in a ‘watch this space’ situation.
Francis Mackie, Partner
0207 822 7174
francis.mackie@weightmans.com

8 InView | An independent eye on Insurance
UNSETTLED
CONDITIONS
FOLLOW EXTREME
WEATHER EVENTS
Severe weather events, possibly climate
change-related, seem to be happening
more frequently, with global repercussions
for insurers, even when extreme weather
conditions are localised.
Colin Peck, Partner
020 7822 1984
colin.peck@weightmans.com
Simon Colvin, Partner
0161 233 7356
simon.colvin@weightmans.com
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
9
When natural disasters occur they cause greater damage
and larger losses because world populations and city
densities continue to increase.
“Countries are developing and modernising, and the uptake
in insurance cover continues to grow,” explained Colin Peck,
partner in the London Market team at Weightmans.
“Often it can be incredibly difficult for the emergency
services, and subsequently loss adjusters and technical
experts, just to gain access to sites, particularly if there is
‘wide area damage’ such as that following Hurricane Katrina
in 2005, the Chilean earthquake of 2010, the New Zealand
earthquakes of 2010, the Thai Floods of 2011 or Superstorm
Sandy in 2012.”
In today’s global economy, the effects of extreme weather
events in one region can also impact upon businesses
thousands of miles away.
“Such ‘contingent business interruption’ losses have arisen
because globalisation of businesses has meant far greater
inter-dependency, with often very complex supply chains that
can be adversely affected by a break in the chain on the other
side of the world,” explained Colin.
Another worrying development is ‘claims leakage’ – the
difference between the actual claim payment and the amount
that would have been paid if more effective controls had
been in place.
“There is clearly potential for some claims leakage where you
are dealing with wide area damage claims, with multinational
corporations dealing with literally thousands of individual
claims from various sites in one region,” continued Colin.
“The sheer volume of claims, the conditions on the ground
and the language issues can make things very difficult.
Claims exaggeration may well creep into the process,
particularly if London adjusters can’t work in that jurisdiction
because of local regulations.”
Nearer to home, UK property insurers are likely to make
an underwriting loss as a result of the storms and flooding
that hit the north of England in the winter months of 2015.
Storm Desmond was largely concentrated in Cumbria in
early December, with Storm Eva hitting Yorkshire and
Lancashire on Boxing Day, and Storm Frank hitting
Scotland on 30 December and New Year’s Eve.
“The storms could also result in some reinsurance losses,
particularly where the insurer is more exposed to commercial
properties than personal lines. However, I suspect that
the continuing soft market means we are unlikely to see
widespread increases in premium,” added Colin.
“What has been interesting is the way in which loss adjusters
and insurers have responded to assessing the losses, with
increased use of technology such as iPads and drones
playing an important part.”
The failure of flood defences could represent another
emerging risk, according to Simon Colvin, Weightmans
partner specialising in environmental law.
“Flooding claims could be made against the Environment
Agency where there is a question of whether it had a duty
to protect against flood damage and whether it breached
that duty,” said Simon. “In general terms it would be difficult
to establish liability, but in specific situations such as York,
where individual flood defences didn’t work properly, there
could be grounds for claims.”
Landowners with water courses running through their land
could also face potential claims for flood damage.
“Insurers may well ask land owners if the water courses
flowing through their land, or land adjoining someone else’s
property, have been properly maintained: for example, if
dredging work has been carried out and what action is being
taken to manage any risks,” continued Simon.
He believes air pollution is a further emerging risk, citing
allegations by environmental campaigning organisation
Client Earth that London’s air pollution in eight days in
January exceeded the legal limit for the whole of 2016.
Client Earth claims the UK government is failing to deal with
illegal levels of air pollution which, it says, causes thousands
of early deaths in London every year.
“In terms of insurance claims, people are testing the ground
in this area. Successful claims may not be possible right now,
but this situation could change as developments continue in
science and technology,” added Simon.
Rating agency Fitch believes the winter storms could cost
insurers more than £1.5 billion, although that is still less than
the £3 billion faced after the summer floods of 2007, and
insurers may still report a profit for the year by using reserve
releases to support their 2015 results.

10 InView | An independent eye on Insurance
ASSESSING THE
RISKS OF UK
PROFESSIONALS
WORKING ABROAD
UK professionals operating overseas
are facing a greater number of
claims. Patrick Gaul explains why.
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
11
The need for UK professionals to work abroad is increasing
due to a number of factors including globalisation, the
importance of English law, the significance of London,
the insurance market and the widespread use of the
English language.
The upshot is likely to be a corresponding increase in the
number of claims against UK professionals. A number
of major cases reported in 2015 illustrate the perils that
professionals face when working in foreign jurisdictions.
Symrise AG v Baker & McKenzie
The law firm advised on a large company acquisition that
involved loading subsidiary companies with debt to gain
a tax advantage. This resulted in an investigation by Mexican
tax authorities. The company settled the tax claim for $162
million, which it then sought to recover in damages.
The solicitors were found negligent, but avoided liability
because the company’s action in settling the tax liability
was not reasonable. Not only were significant sums at stake,
but there was also much complex evidence and uncertainty
as Swiss, German and Mexican tax laws were involved.
Watson Farley & Williams v Itzhak Ostrovizky
The solicitors drafted agreements for a solar energy scheme
in Greece and were blamed for the claimant’s loss of
investment. The claimant alleged that the law firm failed to
protect him against actions by his partner and in failing to set
up the right vehicle for the project. The solicitors were again
successful (at first instance and on appeal). However, the first
hearing lasted 10 days and the appeal involved a substantial
revisiting of the facts and very significant documentation.
Expert evidence on Greek law and Greek solar energy was
required and quantum was around £13 million.
Timothy Wright v Lewis Silkin LLP
Timothy Wright entered into a contract as chief executive
of a company involved in setting up the lucrative Indian
Premier League cricket competition. The solicitors had drafted
the employment contract entitling him to £10 million in the
event of constructive dismissal. After dismissal he sued
his employer but proceedings to enforce the judgment in
India proved fruitless and he lost over £1 million without
recovering a penny. He succeeded in establishing that
the solicitors were negligent for failing to advise about
jurisdiction and the court found that, as a result, Mr Wright
lost the chance of securing his entitlement, assessed at 20%,
leading to a damages award of £2 million.
Titan v Colliers International (In Liquidation)
Colliers lost at first instance in a very substantial valuation
case. Colliers had valued a commercial property in
Nuremberg at £135 million in 2005 when the market was
strong. In 2009 the tenants became insolvent and the
property was sold later in administration for £22.5 million.
The judge at first instance valued the property at
£103 million. Colliers’ appeal was successful on the issue
of negligence. At the Court of Appeal the court said the trial
was complex and clearly there was great difficulty regarding
expert evidence, with both parties alleging that the other’s
was inappropriate because of a lack of familiarity with
Germany or because of conflicts. The Court of Appeal found
that the valuation was within a 15% margin and therefore
Colliers were not negligent.
A claim involving law firm Fox Williams being sued by a
client for failing to include an English jurisdiction clause in
his retirement agreement with EY Russia, is more evidence
of the added difficulties and dangers of involvement in
foreign work.
The broader picture
As well as the foreign element introducing multiple layers
of complexity – with substantial figures at stake – the
cases also show that any subsequent litigation against
the professionals is particularly challenging, expensive
and uncertain.
Insurers should be vigilant about the amount of work
being undertaken by professional services firms which
has a foreign element. As well as obtaining data about
the amount of work and revenue generated in foreign
jurisdictions they should also know what element of work
undertaken domestically has a foreign angle.
Moving forward, insurers need to increase their
knowledge and awareness of the added risk presented
by such work and regularly review their underwriting
policies to cater for potential greater exposure.
Patrick Gaul, Partner
0151 242 7925
patrick.gaul@weightmans.com

12 InView | An independent eye on Insurance
WHO IS IN THE DRIVING
SEAT ON THE ROAD
TO AUTOMATION?
The global race to bring driverless cars to the masses is well underway.
If self-driving vehicles deliver on their promises, they will save millions of
lives around the world and have a major impact on motor insurance.
Matthew Avery, Director of Insurance Research at Thatcham Research,
looks at how the market is gearing up.
Autonomous or driverless vehicles will bring enormous
advantages to both society and the insurance industry.
In an analysis of insurance claims an autonomous emergency
braking (AEB) system fitted to the VW Golf Mark 7 has
already shown a 45% drop in the number of third party
injury claims.
In-light of this the Society of Automotive Engineers (SAE)
have defined a six level (zero-five) process to describe levels
of vehicle autonomy, from autonomous braking to complete
door to door automation.
By 2025 we expect to have progressed from SAE level zero
automation – where the vehicle is totally driver-controlled,
to SAE level five – the completely autonomous journey.
However, the transition is not without issues for insurers
because ongoing developments in technology, regulation
and insurance are continually in play.
Recently we have seen the development of cars that steer
themselves and by 2018 hands-free driving will be legally
possible – SAE level three. The main challenge will be to
change the law so that it reflects a joined-up process
of evolution.
For example, existing radars and cameras have a range of
around 100m, but travelling at 80mph gives the system only
three seconds to react. Clearly this is not enough for a
hands-off driver to re-engage and take appropriate action.
This issue is most acute at level three – where periods of
autonomous driving are possible on motorways, but drivers
must verify every few minutes that they are aware of what is
happening around them – that they are still “in-the-loop”.
For this reason, major manufacturers such as Volvo have
said they will bypass level three and go direct to level
four. This is where the vehicle is capable of using a cloudbased
monitoring system that means the driver will never
need to be in the loop while driving on motorway or dual
carriageway. However, level four technology will not be
available until 2020/21.
Of course the next major question for insurers is who is liable
if the driver is travelling hands-off and the vehicle is involved
in an accident. To resolve these issues we have formed the
Automated Driving Insurer (ADI) Group, comprising top
insurers, the ABI and Thatcham Research, which is chaired by
David Williams of AXA.
Our remit is to consider the implications around liability and
put them together so insurers can establish the conditions
that must be met in order to issue cover for driverless cars.
A key development we want to see is manufacturers
specifying the automated capabilities of their vehicles as
an open source for insurers because this will be crucial to
decisions on cover and issues of liability. The most advanced
technology will enable manufacturers to say “this is not our
fault” and we want the same information to be available
to insurers.
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
13
We believe this level of functionality must go into the
regulations on how automated cars are built. Maybe the
ADI will accept level three with all its complications,
and maybe we will want to move directly to the more
straightforward landscape presented by level four. Until
we have the right information, though, it is impossible to
say which direction will be taken.
Looking ahead to the longer term, the ADI can only see the
level of claims falling substantially. In the next ten years
we estimated there will be 40 or 50% fewer claims.
Looking ahead to the longer term, the
ADI can only see the level of claims
falling substantially. In the next ten years
we estimated there will be 40 or 50%
fewer claims.
The risk element and cost will no longer be around the
driver, but the vehicle. Volvo and Audi say they will accept
liability if someone is using their vehicles in driverless mode,
but most manufacturers are not big enough to provide this
service so we are likely to see other models that involve
customers buying insurance with their car. The upshot is
that information on safety systems must be made available
upfront to insurers.
The next ten years will see impressive acceleration in the
conversion to driverless cars. However, the number of
variables in technology, regulation and insurers’ attitudes to
risk mean we will not be able to take anything for granted
along the way.
Matthew Avery, Thatcham Research,
Director of Insurance Research

14 InView | An independent eye on Insurance
VIEWPOINT
GEARING UP FOR
DRIVERLESS CARS
Driverless vehicle technology has the potential
to be a real game changer on a global level.
Bavita Rai, Partner
0121 200 3499
bavita.rai@weightmans.com
The shift from personal lines motor insurance to
product liability insurance could introduce big
aggregation risk caused by a system failure affecting
multiple vehicles at once.
Following the US, Japan and Germany, where driverless
cars have already been trialled, the UK Government
recently announced that eight projects have been awarded
£20 million in funding to develop the next generation of
autonomous vehicles.
Trials to test driverless cars on the streets are currently in
progress in Bristol, Coventry, Milton Keynes and Greenwich.
Autonomous vehicles are also being used in Heathrow
to shuttle passengers, although these are currently on
designated tracks.
Documents obtained under the Freedom of Information
Act indicate that Google has held multiple discussions
with the British government about the prospects for
driverless cars, praising the UK’s approach to driverless car
rules and expressing a particular interest in how vehicles
should be insured.
The impact autonomous vehicles will have on traditional
motor insurance cannot be overstated. The ABI notes 94%
of road accidents are being caused by human error, but
that figure is likely to reduce dramatically with autonomous
cars taking to the road. With less road traffic accidents and
less claims, KPMG believes that the personal automobile
insurance sector could shrink to less than 40% of its current
size by 2040.
However, there remain roadblocks to progress. A recent crash
by one of Google’s self driving cars in California confirms
that the current technology is far from flawless, while
Google has also admitted that its prototype driverless car
struggles to spot potholes or has yet to be tested in the snow.
Driverless cars will also be an appealing target for hackers.
For these cars to be able to self-drive, they have to be
able to negotiate with each other and the roadway.
To accomplish this, driverless cars will have multiple
avenues of communication with each other and the outside
world, and less oversight from a driver to correct any errors.
The constant machine-to-machine communications present
a limitless number of underlying security risks. Further, the
constant software updates will need to be handled in
a manner that minimises any cyber security risks.
Unsurprisingly, there are also a range of legal issues
to consider.
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
15
Currently, the legal position of a driver ceding control over
the steering and similar controls in a highly automated
vehicle is untested before the British courts but it seems
likely that with cars becoming automated, risk will be
transferred from the individual driver to the manufacturer.
The shift from personal lines motor insurance to product
liability insurance could introduce big aggregation risk
caused by a system failure affecting multiple vehicles
at once.
In a welcome development, the UK’s motor insurance industry
is grouping together to tackle the rise of driverless cars and
discuss the legal issues surrounding their use on public
roads. The newly created Automated Driving Insurance Group,
which is being led by the Association of British Insurers (ABI)
in association with Thatcham Research and includes
11 of the UK’s biggest motor insurers, says it wants to
“smooth the path of driverless cars” by addressing the
legal issues of autonomous vehicles on public roads.
There’s no doubt that the conversion to driverless vehicles
will change the amount, type and purchase of motor
insurance. A period of unprecedented change has begun
with safer cars changing the insurance landscape.
Accidents will never go away though. With new technology
there will always be risk – and where there is risk there will
always be a role for insurance.
Market Affairs Group
Weightmans’ Market Affairs Group (MAG) is responsible
for all forms of market affairs activity on behalf of the
firm. MAG can report and inform insurers on the
latest market developments and translate this into
actions, objectives and strategies providing real value.
The ABI notes 94% of road accidents are being
caused by human error, but that figure is likely
to reduce dramatically with autonomous cars
taking to the road.

16 InView | An independent eye on Insurance
HIGH FLYING RETAILERS
PRESENT FRESH
INSURANCE CHALLENGES
The idea of drones flying packages direct to consumers’
homes was once ‘pie in the sky’. Not any more.
Peter Forshaw examines the implications for insurers.
Peter Forshaw, Partner
0151 242 7935
peter.forshaw@weightmans.com
The recent Queen’s Speech and the proposed regulation
under the Modern Transport Bill highlight the anticipated
increased reliance on unmanned aerial vehicles (UAVs)
or drones. Drones delivering goods to consumers’ homes
are expected to reshape the retail space – not to mention
significant sections of the insurance market. The potential
impact of automated drones dropping off packages within
30 minutes of orders being placed is significant. Yet so
too are the emerging risks and challenges facing insurers,
requiring them to plan carefully how they underwrite the
insurance for this expanding market.
Developments in UK UAV regulation to date have been
patchy, with only limited guidance issued by the Civil
Aviation Authority (CAA). Currently there are 1,114
commercial licence-holders for ‘small unmanned aircraft’,
largely relating to the emergency services and activities
such as aerial photography. As indicated in the Queen’s
Speech, the Government’s intention is to introduce new
regulation to “bring safe commercial and personal drone
flight for households and businesses a step closer”, to put
Britain at the cutting edge of safe technology.
The express permission of the Civil Aviation Authority
(“CAA”) is required for anyone using drones for commercial
purposes, with the need to satisfy the “competence” test.
Operators who fail to comply with the CAA’s requirements,
including in respect of airspace restrictions, face prosecution.
The current maximum penalty upon conviction is an
unlimited fine and/or imprisonment. The use of such devices
should not therefore be undertaken lightly.
Drones can deliver many financial and competitive
advantages to commercial retailers:-
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
17
Reduced times between point of order and delivery;
Delivery access to more remote locations;
Reduced reliance on conventional road-based
logistics providers;
Evaluation of footfall and traffic movement at retail
premises at various times of the day;
Quasi-static security monitoring drones with a
‘flying mode’ activated by human remote control
to assist with crime prevention;
Drone interface with customers’ smart phones to
monitor behaviour and purchasing activity;
Aerial reconnaissance to identify potential development
sites for retail expansion.
It remains to be seen whether these various benefits will
outweigh the emerging risks and challenges to retail
operators and their insurers when underwriting suitable
cover. As a survey for Munich Re last year in the States
showed, there remains significant public unease over the use
of UAVs as a result of the associated risks, something which
those developing and insuring such technology must work
hard to overcome. Similarly, insurers will need to decide to
what extent the use of such devices is underwritten and the
extent of any insurance protection offered.
Public liability
The report in April of a drone hitting a British Airways
plane is just one example of the potential dangers of
drones, rendering operators and their insurers liable for
prosecution and civil litigation following operator or other
error. Employers (and their insurers) can be vicariously liable
for their staff’s inadvertence even if not at fault themselves.
Similarly, there will be renewed focus on an operator’s
detailed risk assessments and training given to staff as
part of their decision to adopt the use of such devices for
their retail or other commercial needs. The reach of drones
means that such risks are extensive – collision with people,
buildings, and other aircraft, leading to property damage,
personal injury and possible loss of life in extreme cases.
Uncontrolled use could lead to the loss of drones themselves
with the consequent rise in first party insurance claims.
Similarly, as drones become more autonomous, the potential
for hacking and cybercrime magnifies, already a particular
challenge to a sector which stores extensive customer details
for commercial purposes.
Product liability
The technological aspects of drones can lead to product
malfunction, exposing manufacturers, insurers and others
to liability for losses resulting from identified defects. Such
litigation is liable to be complex and costly, requiring the
identification of the specific relevant cause and determination
of whether such liability should rest with the manufacturer,
the programmer, the operator or a combination of these.
As drones become more commonplace, suppliers and
insurers may find themselves involved in product recall
of such devices, a process which brings direct cost to a
business but also wider impact on brand and sales. Equally
retailers and other operators may face similar claims for
business interruption from those impacted, and suffer such
impositions to their own business, in the event of defective
drone use.
Nuisance
A rise in complaints by the public can leave operators
vulnerable to actions for public and private nuisance,
trespass, or applications for injunctions to prevent
operators from using drones either at all or within key
operational areas. In additional to the detrimental impact
on commercial operations, breach of such injunctions could
leave operators in contempt of court and potentially liable
for fines or imprisonment.
Privacy
Drone operators may inadvertently breach legislation such as
the Data Protection Act, the Human Rights Act, the Regulation
of Investigatory Powers Act and the Sexual Offences Act, with
a possible increase in criminal and civil litigation, as the use
and scope of drone use becomes more widespread.
Jurisdiction/coverage
There will also be associated jurisdictional questions
in situations where a retailer has a contract with a
drone operator. Whilst in many ways similar to existing
relationships between retailers and delivery companies,
drones will add an extra layer of complexity that insurers
will have to reflect in their policies. In the retail sector, the
issue of leaving items that the consumer has not signed for
poses challenges over the security of delivered items. Who
would be liable, for instance, if a drone mistakenly delivered
a package to a consumer’s insecure front garden instead of
the back and the package was subsequently stolen? Insurers
will need to be aware of their policyholder’s retail terms and
conditions and draft their policies to ensure that insurance
coverage is not unlimited.
The end result is likely to be the call for operators to (either
voluntarily or compulsorily) purchase more extensive
insurance going forward, such as public liability, product
liability, professional indemnity, cargo liability, cyber and
D&O cover.
While many of these emerging risk factors can only be dealt
with once the likes of the Modern Transport Bill are put on the
statute book and the drone technology develops accordingly,
insurers will need to start thinking now about different types
of exposure in largely uncharted areas, and the impact of
cross jurisdictional challenges.

18 InView | An independent eye on Insurance
CABIN FEVER –
TOXICITY IN THE AIR
While employers – and insurers – are familiar with stress-related claims,
other global risks are emerging. Jim Byard provides his thoughts.
Aero toxicity syndrome involves contaminated air being
drawn into airline cabins from their jet engines.
British Airways has been subject to a class action by pilots
and cabin crew who claim to have suffered a range of serious
health problems as a result of breathing in fumes mixed with
engine oil and other toxic chemicals, known as fume events.
The Civil Aviation Authority (CAA) says incidents of fumes
in plane cabins are rare – only 0.05 per cent of all flights
by UK-based aircraft – and insists there is no evidence of
long-term health effects.
The CAA doesn’t recognise aero toxicity syndrome because
there is no defined diagnostic criteria and the symptoms are
similar to a broad range of other illnesses or syndromes.
There is also an unanswered question about why passengers
who fly frequently have not reported symptoms, although
this may be partly explained by experts who say different
individuals have different levels of susceptibility to
toxic fumes.
Central to the debate is an inquest into the death of pilot
Richard Westgate. He died in December 2012, aged 43, after
complaining of long-term health problems. The case has been
adjourned to enable the coroner to examine expert opinion.
If the coroner rules that Mr Westgate’s death was down to
aero toxicity syndrome, and it can be established that fume
events have led to serious ill-health among other pilots and
cabin crew, there will be serious implications for insurers in
the aviation sector.
Although the jury is still out on conflicting epidemiology
studies, one thing that most people seem to agree on is that
the research into aero toxicity syndrome is very limited and
much more needs to be done.
Jim Byard, Partner
0113 213 4014
jim.byard@weightmans.com
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
19
STRESS:
A COSTLY EPIDEMIC
After musculo-skeletal disorders, work-related stress is now the second
most reported work-related health problem in Europe, according to the
European Agency for Health and Safety. Roddy Macleod explains why.
For the last two years, work-related stress has been the
theme of European Health and Safety Week, while Britons are
finding their jobs more stressful, unstable and demanding
than ever before, according to an extensive poll conducted
for the Trades Union Congress.
The UK is in the midst of a ‘stress epidemic’ with over
10.5 million working days lost to stress each year, costing
employers in excess of £3.7 billion. Health and Safety
Executive (HSE) figures for 2014/15 show that stress,
depression and anxiety account for one in five employees
suffering from work-related illness, which was reflected in
234,000 people taking time off work with a stress-related
condition. This compares with only 169,000 individuals who
were off work with neck and back injuries, making stressrelated
illness the largest single cause of workplace absence.
The increase in absence has seen a corresponding increase
in claims, partly due to government changes to the way
employers’ liability and public liability claims are dealt with
now, which imposes fixed costs on less complex claims.
Nowadays people are more interested in stress claims
because, as stress is classed as a disease, if the claim
succeeds the claimant solicitors get unlimited hourly rate
costs. Another key development, in 2013, saw employment
tribunals introduce issue fees for claims. According to
colleagues working in this area, this meant numbers of cases
fell by 75%.
Cases that would previously have been brought as an
employment tribunal claim, for example disability or sexual
discrimination, are now brought as a civil claim. This is
because in a civil court you get your costs paid on top of your
compensation. In an employment tribunal claim, even if you
win, you don’t get your costs paid.
Roddy Macleod, Partner
0161 233 7391
roddy.macleod@weightmans.com

20 InView | An independent eye on Insurance
MARKET
WATCH
Businesses are constantly seeking new and innovative ways of
maintaining a competitive advantage. One way to stay ahead
of the field is to monitor the horizon for legislative, social, and
economic change and either insulate against any negative effect,
or maximise any benefits. Weightmans’ Market Affairs Group not
only monitors the horizon, but actively engages the market to
effect change. In this edition of Market Watch, we take a look at
some upcoming issues with global implications.
2. TECHNOLOGY AND CYBER RISKS
With our lives becoming increasingly reliant on the benefits
delivered by digital technology such as the internet, smart
devices, drones and autonomous vehicles, we need to
remember that these technologies constitute one of the biggest
threats to our global economy. Cyber crimes amounting to
millions of pounds can now be committed by teenagers from
the comfort of their own bedrooms. There is also a marked
increase in the volume of industrial and national hacking and
cyber terrorism incidents raising serious questions about the
security of our online systems and identities.
These digital technologies bring with them familiar risks,
albeit with the potential to manifest on an unimaginable scale.
What is clear is that insurers have a place at the forefront
of this digital evolution and the need to engage with the
government to create a regulatory framework has never
been greater. Essential perhaps, if insurers are to realise
the opportunities for significant premium growth without
underestimating the risks that such technologies bring.
1. EU GENERAL DATA PROTECTION REGULATION
(“THE REGULATION”)
In previous editions of Market Watch we advised of the
forthcoming Regulation which was still being debated in the
European Union Parliament. The Regulation has now been
agreed and will come into force sometime during the first half
of 2018. It applies directly to all EU member states and will
have significant implications for commercial organisations
conducting business within the EU.
The Regulation:
creates a pan-European data protection board;
requires mandatory notification of data breaches “without
undue delay” (where feasible within 72 hours of awareness)
and provides guidance on when an organisation must notify
regulators and data subjects;
3. BREXIT
David Cameron has called the Referendum on Britain’s
membership of the European Union for voting on 23 June
2016. The ABI in response released a statement (full text can
be found at www.abi.org.uk) where Huw Evans, ABI Director
General said “as a global insurance centre of excellence, the
UK has a major influence in shaping the rules of the EU.
And as the undisputed financial services centre of the EU,
the whole of the UK is able to benefit from the jobs, tax
revenue and economic prosperity this position brings.”
Whilst the outcome of the Referendum is far from certain,
clients may wish to prepare their businesses in advance of
the Referendum so as to be best placed to react should the
outcome be “Brexit.”
creates a tiered sanctions regime with fines for a breach
being up to 4% of the offender’s global annual turnover;
applies to all organisations conducting business in Europe,
regardless of whether they are domiciled within the EU with
many needing to appoint a representative in the EU;
establishes in legislation the principle of the “right to
be forgotten.”
Now that the final provisions are published, insurers need
to be quick to ensure that their processes and systems are
updated to comply, as a breach of the new Regulation has the
potential to be catastrophic.
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
21
4. SOCIAL MEDIA
We’ve alluded to social media having a massive impact on business in general as well as the insurance sector. However, with an
increasing number of insurers having a global presence, issues of brand and reputation have never been more important. With the
ability for your customer’s complaint or your service failing to go “viral”, travelling around the world in a matter of hours, it has never
been more important for you to develop a coherent and well balanced social media policy. Social media is the new battleground for
customers. You need to be well prepared.
MAG
Weightmans’ Market Affairs Group (MAG) is responsible
for all forms of market affairs activity on behalf of the firm.
MAG can report and inform insurers on the latest market
developments and translate this into actions, objectives
and strategies providing real value.
If you would like to contact MAG please email:
marketaffairs@weightmans.com
Bavita Rai,
Innovation &
Client Affairs
0121 200 3499
David Johnson,
Political Affairs
020 7822 7146
Doug Keir,
Scottish Affairs
Kurt Rowe,
Market Affairs
0141 375 0869 020 7822 7132

22 InView | An independent eye on Insurance
SPOTLIGHT
Weightmans Partner re-elected Chair
of Association of Costs Lawyers
Iain Stark, Weightmans Partner and Head of Costs, has been
re-elected as Chairman of the Association of Costs Lawyers (ACL)
and will take up his position following the AGM on the 14th May
2016, lasting three years.
Iain, a Costs Lawyer who has been practising within legal costs for
in excess of 25 years, joined Weightmans as a Partner in May 2015.
He is renowned for his advocacy skills and ability to solve disputes
via innovative solutions.
Iain is based at the firm’s London office in
EC4. He works across the entire business,
heading up the costs department.
Iain commented on his new role:
“I am delighted to have been
re-elected as Chairman
of the ACL. It is an honour that
the membership, following my
previous tenure concluding in May
2012, has provided me with the opportunity to lead the
Association once again and take the Association to the
next step of being the spokesman for the costs profession
as a whole.”
Weightmans become ABI associate member
Weightmans has joined the ABI as an associate member and is one
of the sponsors of the ABI’s Future Leaders programme for 2016
which aims to develop up-and-coming senior industry leaders.
The Association of British Insurers (ABI) associate membership
category has been developed to meet interest from non-insurance
companies in joining the ABI, such as legal firms, consultants,
price comparison sites, and the wide variety of suppliers, including
software houses, who help insurers deliver their services.
Weightmans LLP certified as one of the
Top Employers United Kingdom 2016
We are proud to announce we have been officially certified by the
Top Employers Institute for our exceptional employee offering for the
ninth year running.
The annual international research, undertaken by the Top Employers
Institute, recognises leading employers around the world; those
that provide excellent employee conditions, nurture and develop
talent throughout all levels of the organisation and which strive to
continuously optimise employment practices.
Sam Airey, Human Resources Director, was delighted to accept the
award on behalf of the firm. She said:
“The accreditation process involved a rigorous
independent assessment and audit to review our
people management policies and covered areas including
culture, working conditions, career development and
pay and benefits. Weightmans scored very highly in all
of the categories which were assessed and we are proud
to be recognised for the ninth year as one of Britain’s top
employers – we are a people business and our staff are
absolutely key to our continued success.”
The Top Employers Institute globally certifies excellence in the
conditions that employers create for their people and we are
delighted to be officially recognised as a leading employer.
© Copyright. Weightmans LLP 2016. All rights reserved.

Issue 3 | Spring/Summer 2016
23
Weightmans and the Arts
Proud to sponsor the Arts across the UK
“Through our involvement advising pro-bono on the HOME development in Manchester,
we have seen first-hand how private and public sector collaborations with cultural
institutions can create exciting opportunities for the local business community as well
as enriching the region on a wider scale.”
Dan Cutts, Senior Partner
Sponsorships include:
@weightmans
weightmans
www.weightmans.com

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Weightmans – your partner for growth.
For further information, please contact
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