Financial institutions will continue to face a firm insurance market in 2021, due to ongoing pandemic and economic uncertainty and potential claims, according to a report published Thursday by Allianz Global Corporate & Specialty SE.

COVID-19 could generate claims across almost all financial institutions insurance lines of business, AGCS, a unit of Allianz SE, said in the report. Directors and officers, professional indemnity and errors and omissions insurance could see claims, as well as crime and cyber lines.

Market corrections and insolvencies could impact financial institutions’ balance sheets, increasing exposures for their directors and result in lawsuits, the report said.

Claims could be brought against directors where there has been a failure to foresee or disclose COVID-19 related risks, or if sufficient steps were not taken to mitigate its impact, for example.

“The financial services sector faces a period of heightened risks. COVID-19 has caused one of the largest ever shocks to the global economy, triggering unprecedented economic and fiscal stimulus and record levels of government debt,” Paul Schiavone, global industry solutions director financial services at AGCS, said in a statement. “Despite an improved economic outlook, considerable uncertainty remains.”

Rates on financial institutions' risks have been increasing and many insurers have restricted capacity in some areas where exposures are highest, the report said.

Financial and professional lines saw average first-quarter pricing increases of 40%, down from 45% in the previous quarter, according to Marsh LLC’s latest Global Insurance Market Index, released earlier this week.

Compliance issues are one of the biggest drivers of insurance claims involving financial institutions, but losses related to the sector’s growing reliance on technology are also on the rise, AGCS said.

Cyber incidents resulted in the most costly claims involving financial institutions, based on AGCS’ analysis of 7,654 claims worth about $1.05 billion, reported from Jan. 1, 2015, to March 31, 2021.

To date, the pandemic has not yet given rise to large numbers of financial lines insurance claims overall, due in part to government support and stimulus packages, AGCS said.

Claims have emerged in only a few distinct areas, such as non-payment of business interruption claims by insurers and claims against banks relating to their administration of loans under the U.S. Cares Act Paycheck Protection Program.

A smaller number of claims have also been made by investors against asset managers alleging they failed to disclose risks associated with the pandemic, the report said.

More insurance and risk management news on the coronavirus crisis here.