In a post in the Pixel User Community, Googler IsaacOnCamera wrote, “First, for some background — flare is a property of ALL camera lenses. It comes in a ton of different shapes and sizes and can even be used for creative effect — good and bad :-). The shape, color, amount, etc. of flare is related to dozens of different parameters of the lens structure and inclement light. However, we have seen reports about this ‘halo/arc flare’. This is the specific kind of flare that appears as a bright/low-contrast arc in the corners of the frame.”
He adds, “You can expect a software update in the next few weeks that will improve the effects of this issue. We’re working on some algorithms that recognize the halo/arc flare, characterize it mathematically, and then subtract it from the image. :-) You will need to use HDR+ to see the benefits of this software.”
He also points out that this isn’t a hardware issue which means that if you are experiencing it yourself, you don’t need to send your phone back because chances are the replacement unit will have the same issue. If this bothers you a lot, then do keep an eye out for the update which should be rolling out in the next few weeks.
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