Evolving risk and claims dynamics for Australian asset managers

Australia’s asset management sector is entering a more complex phase of risk. 

While insurance market conditions have softened in places, the real shift is not in pricing, but in the broader environment in which claims and disputes arise. This environment is becoming more demanding, less defined by isolated events and more influenced by how firms operate in practice.

A consistent theme emerging across the current landscape is that claims are unlikely to be defined solely by discrete incidents, and are increasingly expected to arise in the context of governance, decision-making, and organisational behaviour. In many cases, the key question may extend beyond what went wrong, to whether the systems, controls, and oversight in place were sufficient to prevent, detect, and respond appropriately.

This creates a subtle tension. Many asset managers continue to view risk through the lens of investment outcomes, yet there is a growing expectation that the conditions in which claims and disputes arise will be closely linked to governance and organisational behaviour.

For asset managers, this represents a material shift in where risk sits and how it needs to be managed.

Investor claims are evolving beyond performance disputes

Investor-driven claims remain central to the asset management landscape, but their nature is becoming more nuanced.

Where disputes have historically been driven by performance outcomes, they are now also framed around process. Greater scrutiny is being applied to how investment decisions are made, how risks are articulated, and whether investor expectations are being appropriately managed. This is particularly evident in an environment where institutional capital, most notably through superannuation, demands a high level of transparency and consistency.

In parallel, the continued presence of litigation funding has supported the development of more structured and technically sophisticated claims. These often involve detailed analysis of investment processes and disclosures, rather than simply focussing on loss outcomes.

This dynamic may be further influenced by the growing use of artificial intelligence (AI) in investment processes. AI tools are increasingly able to digest large volumes of market data, research and newsflow in real time, enabling faster portfolio adjustments and more responsive decision-making. While this can enhance efficiency, it may also contribute to sharper market movements and increased volatility, particularly in periods of stress.

In this environment, outcomes can shift more abruptly, and performance dispersion may be amplified. Where this occurs, it may increase the likelihood of scrutiny, particularly in relation to how decisions were governed, validated and overseen within the broader investment process.

Regulation and governance are converging as core drivers of risk and scrutiny

Regulatory scrutiny in Australia has become more sustained and more expansive, but the more significant shift lies in how that scrutiny is being applied.

ASIC’s focus continues to extend across private markets, valuation practices, conflicts of interest, and investor outcomes. Increasingly, however, this scrutiny is being reinforced by the way core licensee obligations are interpreted, particularly the requirement to act “efficiently, honestly and fairly.”

What was once often regarded as a broad statement of principle is now being applied as a substantive and standalone basis for enforcement. Recent developments demonstrate that this obligation can be used to assess not just individual actions, but the adequacy of systems, controls and governance frameworks across an organisation.

Regulatory engagement is therefore extending beyond clear breaches or misconduct, into broader assessments of how organisations are designed, governed and overseen in practice.

Private markets are reshaping the underlying risk profile

The continued growth of private markets in Australia is reshaping the nature of exposure and how it is challenged.

As allocations to private credit, infrastructure and other unlisted assets increase, the nature of exposure becomes less transparent and more reliant on judgement. Issues such as valuation, liquidity management, and conflicts of interest introduce a greater degree of subjectivity, which regulators have already identified as an area of focus.

At the same time, this shift takes asset managers into areas where outcomes are inherently harder to evidence and benchmark, particularly where valuations, liquidity assumptions and investor treatment rely on judgement rather than observable market data.

While this does not necessarily translate into a higher volume of claims, it does change the context in which disputes arise, with greater emphasis on interpretation, process and judgement.

Cyber risk is increasingly a catalyst for broader financial lines claims

Cyber risk continues to evolve, but its implications now extend well beyond standalone cyber exposure.

Asset managers are increasingly reliant on data, technology platforms, and third-party providers, creating a broader attack surface and greater operational vulnerability. When incidents occur, their consequences rarely remain contained. Instead, they tend to prompt wider questions around governance, oversight, and preparedness.

Recent Australian enforcement actions highlight this shift in practice. Following a 2023 ransomware-related data breach at FIIG Securities, approximately 385GB of sensitive client data was accessed and around 18,000 clients were impacted, with personal information including identification and financial details exposed. The Federal Court ultimately imposed a $2.5 million penalty, in addition to legal costs, after finding that cybersecurity failures over a multi-year period had enabled the incident.

Importantly, the findings went beyond the breach itself. ASIC identified systemic shortcomings, including inadequate resourcing, a lack of cyber expertise, insufficient staff training, poor system controls, and failures to detect and respond to known vulnerabilities. The incident was therefore treated not simply as a technology failure, but as a breakdown in governance and oversight.

A more connected and demanding claims environment

Taken together, these dynamics point to a claims environment that is not necessarily characterised by a simple increase in volume, but by a shift in how risk is assessed and challenged, and in the context in which claims and disputes are likely to emerge.

Across investor claims, regulatory scrutiny, private markets and cyber exposure, a consistent pattern is emerging. Claims are increasingly influenced by how an organisation operates as a whole, including its governance structures, its systems, and its ability to demonstrate consistency between intention and execution.

This reflects a broader convergence between operational risk, regulatory obligations and insurance exposure. As regulatory expectations continue to evolve, particularly in areas such as governance, systems and control, the threshold for what constitutes a defensible position is also shifting.

For asset managers, this has practical implications. Risk is no longer confined to individual investment decisions or outcomes, but embedded across the organisation, requiring greater alignment between investment processes, governance frameworks and oversight.

In this environment, insurance remains critical, but it is not a substitute for governance. Instead, it sits alongside it, increasingly tested against how well the organisation itself is able to evidence robust decision-making, effective controls and accountability in practice.

About our asset management capability

Asset management is a core client segment for Howden in Australia. 

Our local team collaborates closely with our London-based specialists to deliver a seamless, globally integrated service tailored to the needs of Australian asset management firms. In Australia, our clients range from fund managers, PE firms, real estate investments trusts, real assets and other corporate service providers.