On balance, the world is far, far riskier. While workplaces, automobiles and financial institutions are safer today, there are rapidly growing risks present in cyberspace and ones evolving from the incredible instant communication available now.
Then you have something like the Murdoch issue: A brand can get attacked quickly,
and the information will move all around the world. [Brand risk] is going to continue to
get worse. We’re all vulnerable to the actions of one employee or a few.
And there is a tremendous flocking by people to be part of major coastal populations.
People are living and working in much more dangerous locations. It’s a phenomenon
that’s not slowing down. It’s accelerating.
The world is riskier, but people are ignoring the risk. The earth has been opening up around
the world, for example, but still the take-up rate for earthquake insurance remains low.
Ryan is former chair and CEO of Aon Corp.
Perhaps up until the financial collapse in
2007, we had a collective underestimation
of risk. While it’s tempting to think that we
are now overestimating risk, that is likely
not the case. Today, there is increased risk,
and for the insurance industry, incremental
growth will have an increased risk profile.
In addition to the increasing financial and
PRESIDENT | EQECAT
economic instability in the world, we
also see the highest economic growth
occurring in Asia, which is exposed to significant natural hazards. The developed
world is also becoming riskier as a result
of the continued economic slide. With
dwindling economic resources, maintenance and mitigation will suffer. The
public response to large-scale disasters
may be constrained due to tight budgets.
PRESIDENT & CEO | NAVIGATORS GROUP
We live in a world today that is more technologically advanced than it was 10 years ago, more prone to climate
extremes than it was and—
post-financial-cri-sis—much more litigious and sensitive to a new
and complex regulatory environment.
Significant risks we face today
weren’t on the radar a decade
ago, such as those associated with product recalls and
outsourcing activities emerging
in the extraordinarily dynamic
life-sciences industry. The Food
and Drug Administration (FDA)
reported 27 new medical devices
approved for public use in 2010, but, on
the flip-side, the FDA also recalled 46 medical devices. Contract research organizations
(CROs) help biopharmaceutical firms reduce
fixed costs by outsourcing; the rising demand
for CROs creates potential exposures that we
didn’t see before.
Globalization creates new emerging risks also.
We are all familiar with the Chinese-drywall litigation. How can a U.S. importer be assured of the
safety of foreign-manufactured products from jurisdictions that lack enforced safety standards?
New environmental-liability risks also are
emerging. With increasing national attention
on the environment, the regulatory environ-
ment is changing on a daily basis. Just last
year, there was a new U.S. EPA regulation man-
dating lead-safe construction practices.
The world’s insatiable demand
for oil has led to new risks in
offshore oil exploration and
production. Deep-water drilling
requires new technologies. Ul-
timately, we will learn about
the efficacy of these techniques
through [insurance] losses. The
financial consequences are signifi-
cant. Deep-water production platforms are
valued in the hundreds of millions of dollars
compared to the tens of millions for the old
Cyber-technology risks are evolving on a
daily basis. Hacking, theft of property data
and related government-imposed consumer-protection requirements have dramatically
increased business exposure to claims for
failure to protect data.
tainty is magnified. So if all you ever focused
on was all the prevalent uncertainty, you’d
definitely perceive a riskier world.
Realize, though, that there is also an
amazing amount of certainty in the world, and
when you focus on the certainty, you balance
the uncertainty and ultimately lower your risk.
Did you know that there are over 300 known
cycles—business cycles, biological cycles,
weather cycles—that allow you to accurately
anticipate the future? For example, we know
for certain that a recession, or a recovery
for that matter, will not last forever. Cyclical
changes like this happen all the time. Similarly, linear changes have certainty to them
as well. We know, for example, that when
someone gets a smart phone, they are not
going back to a dumb phone. Once this type of
one-way change occurs, there’s no going back.
That’s a certainty!
So as you look at all the uncertain factors,
you have to balance that by asking yourself,
“What am I certain about?” Certainty based
on both cyclical and linear changes is predictable and can give you the ability to see the
future with more clarity and less risk. When
you have the ability to balance the uncertainty
with the vast amount of certainty that exists,
you can rest easy at night.
August 15, 2011 | National Underwriter Property & Casualty | 15