A new report from Swiss Re, ‘The Globalisation of Collective Redress: Consequences for the Insurance Industry’, warns of the global spread of collective or class actions, pointing up the risks and the opportunities that exist for insurers.

Research published recently by Lloyd’s and the RAND Institute for Civil Justice Europe (Litigation and business: transatlantic trends, pdf 1.6mb, November 2008) has already raised the prospect that class actions are on their way to Europe from the United States, increasing anxieties of a further litigation boom. Europe is seeing a rise in consumer and investor activism, and a growing willingness by legislators to allow people to pursue mass grievances through the courts.

Swiss Re points out in its new report that the European Union is interested in using collective redress both to enable compensation for infringement of competition rules and to improve consumer rights within and across member states. About half of EU member states have already introduced instruments for collective redress and the European Commission is moving towards the introduction of collective redress mechanisms right across the 27 member states.

Swiss Re says insurers need to get involved: “We are convinced that the insurance industry has an interest in actively participating in the ongoing legislative dialogue in order to explain the potentially adverse consequences of unbalanced collective redress systems.”

Swiss Re suggests lawmakers should bear in mind the unintended consequences of the US class action system, which has contributed to a massive increase in the cost of the US tort system to $250 billion annually.

On the other hand, as Swiss Re points out, the broad trend towards the spread of collective action also presents some business opportunities for insurers, such as an increased demand for different liability coverages, including product liability and Directors & Officers.

But whatever systems are adopted in Europe and elsewhere, the imperative must be to look at what is wrong with the US system, where costs are out of control and claims too often made without merit, and prevent it happening here.

As Swiss Re says, “Access for all should make litigation more efficient, not more expensive—for either plaintiff or defendant.”

>Read lloyds.com article: Are class actions coming to Europe, 18 February 2009

Tags: Litigation, Report

This entry was posted by Garry Booth on Monday, June 22nd, 2009 at 2:46 pm and is filed under Insurance Commentary.