Resiliency Efforts

Risks Without Boundaries

Public and private sector experts are planning resiliency efforts to combat potential disaster losses and the problem of underinsurance.
By: | October 27, 2016 • 3 min read

Representatives from the private and public sector met with policymakers and members of the insurance industry in October to discuss ways to build greater resilience in cities.

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“We have an opportunity to start planning now,” said former N.J. Gov. Christine Todd Whitman during “Cities in the Crosshairs: The Case for Investing in Resilience,” presented by Lloyd’s of London in partnership with the American Security Project, a nonpartisan national security think-tank.

“We must build more resilient systems because we know these impacts are coming,” said Whitman, who is board chairman of the American Security Project and a past administrator of the Environmental Protection Agency.

“We desperately need the private sector; this needs to be a collaborative approach.”

The participants at the New York conference discussed best practices in risk assessment, mitigation, adaptation and risk transfer.

The panel discussion included, from left, Kathleen Hamm, counselor to the deputy secretary at the U.S. Department of Treasury; Lloyd’s CEO Inga Beale; and former N.J. Gov. Christine Todd Whitman

The panel discussion included, from left, Kathleen Hamm, counselor to the deputy secretary at the U.S. Department of Treasury; Lloyd’s CEO Inga Beale; and former N.J. Gov. Christine Todd Whitman

The event comes on the heels of the release of Lloyd’s “City Risk Index,” it’s first-ever analysis of the potential impact of 18 catastrophic threats on the gross domestic product of 301 major international cities. The index uses a metric Lloyd’s calls [email protected] to quantify potential losses from threats to a location’s projected 10-year economic output.

“Our risk list shows how much the risk landscape is changing,” said Lloyd’s CEO Inga Beale, who said the report is a “wake-up call to us all.”

“Now the world is so much more about intangible risks,” she said.

“We need to innovate our products to this ever changing world.”

Just 10 threats account for 91 percent of the Total [email protected], according to Lloyd’s research, which was done in collaboration with University of Cambridge.

Nearly half are man-made, including market crash, cyber attack, power outage and nuclear accident.

“A lot of risks used to be geographically bounded,” Beale said.

“Now, with cyber and climate change, it is without boundaries.”

Market crash leads the list by a wide margin, with pandemic, windstorm, earthquake and flood rounding out the Top 5. Oil price shock, terrorism, drought, heat waves, tsunami and volcanos ares some of the other more costly disasters.

New York, and Los Angeles ranked No. 5 and 6, respectively, on the list of cities with high-asset values that are most financially exposed to disaster. Also high on the list were Taipei, Tokyo, Seoul, Manila, Istanbul, Osaka, Hong Kong and Shanghai.

Dense population coupled with climate warming and new technology contributes to higher damages associated with natural disasters.

“There are more people living in the cities than at any time in history,” said panel leader Dante Disparte, founder and CEO of risk and capital management firm Risk Cooperative.

Population density coupled with climate change and new technology contributes to higher damages associated with natural disasters. Meanwhile, the gap between what the insurance industry pays to cover a catastrophe compared with the actual clean-up cost is widening.

That insurance gap continues to be an elusive goal for the insurance industry at the moment, said Fielding L. Norton, deputy chief enterprise risk officer of XL Catlin.

The insurance gap “is a missed opportunity for my industry to be relevant and to help businesses and communities to get back on their feet in the aftermath of a disaster,” Norton said.

He said his company is working to anticipate catastrophes and devise innovative products to address them.

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XL Catlin recently devised several programs to reach underinsured areas, and is one of eight participants in Lloyd’s newly created disaster risk facility. The facility involves syndicates cooperatively developing solutions to help developing economies tackle underinsurance and improve their resilience.

“One of the most important things we do for our company and for our clients is to not fail to imagine the things that are possible,” Norton said.

“Failure of imagination is a phrase we use all the time in our enterprise risk management group.”

“Lloyd’s has always been at the forefront of taking new risks,” Beale said.

“We’ve been very much underwriting alongside human progress for centuries and we must continue to do this.”

Juliann Walsh is a staff writer at Risk & Insurance. She can be reached at [email protected]
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Risk Insider: Joe Tocco

Ocean Warming Risk: Why Does it Matter to Insurance?

By: | October 4, 2016 • 2 min read
Currently Chief Executive of the Americas for XL Catlin’s insurance operation, Joe Tocco has enjoyed three decades in the insurance industry at various organizations. He is also a veteran of the U.S. Navy, where he served as a nuclear field service engineer. He can be reached at [email protected]

One of the things I’ve seen firsthand in my insurance career is the interrelated nature of risks; they rarely occur in isolation. A loss in one area often triggers or exacerbates others. Such is also the nature of our environment, where we are observing disturbing changes.

I was fortunate to have served in the U.S. Navy and have been awed ever since by the oceans’ vastness, power and complexity. Understanding the oceans is difficult. Astonishingly, humans have spent 100 times more hours on the moon than in the deepest part of Earth’s oceans.

A new report on ocean warming by the International Union for Conservation of Nature (IUCN), titled Explaining ocean warming: Causes, scale, effects and consequences describes the phenomenon as ‘one of the greatest hidden challenges of our generation.’ The analysis report has been compiled by 80 scientists from 12 countries.

Even though our planet has enough land area to accommodate more than 7 billion people, 71 percent of its surface is covered by water. Oceans have a critical influence on life as we know it – heating and cooling the planet, providing food and supporting global commerce, yet we have only recently started to understand them.

If science and nations are to mitigate climate change, we must clearly grasp how the decline in coral reef health, loss of polar ice, ocean warming, sea level rise and ocean acidification are affecting the people and property that the insurance industry helps to protect.

The report, which is sponsored by XL Catlin’s Deep Ocean Survey initiative, is the third in a series of scientific research programs to better understand the key indicators of climate change. One of the missions of the Survey is to pilot a systematic method for scientists around the world to assess ocean health. What we are learning so far has been startling:

  • Sea levels have risen about 20 centimeters (about 8 inches) since pre-industrial times. If carbon dioxide emissions continue at their current pace, sea levels will rise a further 99 cm (39 inches) by 2100.
  • Many of the world’s largest cities, including New York and London, are exposed to flooding from sea level rise.
  • Hundreds of millions of people will be forced to relocate if sea levels rise at the current rate.
  • In the United States alone, $500 billion of coastal property could be below sea level by the end of this century.
  • The ocean absorbs excess heat and carbon dioxide, and far more of that heat is now buried in the deep ocean, below 700 meters, than was found 20 years ago.
  • CO2 dissolves in seawater to form carbonic acid, increasing acidity. Since the beginning of the industrial revolution around 1750, the acidification of the ocean has increased 30 percent. That change has led to the destruction of coral reefs and many marine species.

Why should the insurance industry care about ocean warming? For one thing, we are in the risk business, and ocean warming represents enormous risks. To manage any risk, we first have to understand it.

If science and nations are to mitigate climate change, we must clearly grasp how the decline in coral reef health, loss of polar ice, ocean warming, sea level rise and ocean acidification are affecting the people and property that the insurance industry helps to protect.

As an industry built on managing risk, we must continue to study the risks facing our planet from climate change and work together to mitigate their effects. Let’s use our expertise in analyzing risk and helping rebuild lives and livelihoods to preserve opportunities for future generations.

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Sponsored Content by Nationwide

Hot Hacks That Leave You Cold

Cyber risk managers look at the latest in breaches and the future of cyber liability.
By: | December 1, 2016 • 5 min read

Nationwide_SponsoredContent_1016Thousands of dollars lost at the blink of an eye, and systems shut down for weeks. It might sound like something out of a movie, but it’s becoming more and more of a reality thanks to modern hackers. As technology evolves and becomes more sophisticated, so do the occurrence of cyber breaches.

“The more we rely on technology, the more everything becomes interconnected,” said Jackie Lee, associate vice president, Cyber Liability at Nationwide. “We are in an age where our car is a giant computer, and we can turn on our air conditioners with our phones. Everyone holds data. It’s everywhere.”

Phishing Out Fraud

According to Lee, phishing is on the rise as one of the most common forms of cyber attacks. What used to be easy to identify as fraudulent has become harder to distinguish. Gone are the days of the emails from the Nigerian prince, which have been replaced with much more sophisticated—and tricky—techniques that could extort millions.

“A typical phishing email is much more legitimate and plausible,” Lee said. “It could be an email appearing to be from human resources at annual benefits enrollment or it could be a seemingly authentic message from the CFO asking to release an invoice.”

According to Lee, the root of phishing is behavior and analytics. “Hackers can pick out so much from a person’s behavior, whether it’s a key word in an engagement survey or certain times when they are logging onto VPN.”

On the flip side, behavior also helps determine the best course of action to prevent phishing.

“When we send an exercise email to test how associates respond to phishing, we monitor who has clicked the first round, then a second round,” she said. “We look at repeat offenders and also determine if there is one exercise that is more susceptible. Once we understand that, we can take the right steps to make sure employees are trained to be more aware and recognize a potentially fraudulent email.”

Lee stressed that phishing can affect employees at all levels.

“When the exercise is sent out, we find that 20 percent of the opens are from employees at the executive level,” she said. “It’s just as important they are taking the right steps to ensure they are practicing what they are preaching.”

Locking Down Ransomware

Nationwide_SponsoredContent_1016Another hot hacking ploy is ransomware, a type of property-related cyber attack that prevents or limits users from accessing their system unless a ransom is paid. The average ransom request for a business is around $10,000. According to the FBI, there were 2,400 ransomware complaints in 2015, resulting in total estimated losses of more than $24 million. These threats are expected to increase by 300% this year alone.

“These events are happening, and businesses aren’t reporting them,” Lee said.

In the last five years, government entities saw the largest amount of ransomware attacks. Lee added that another popular target is hospitals.

After a recent cyber attack, a hospital in Los Angeles was without its crucial computer programs until it paid the hackers $17,000 to restore its systems.

Lee said there is beginning to be more industry-wide awareness around ransomware, and many healthcare organizations are starting to buy cyber insurance and are taking steps to safeguard their electronic files.

“A hospital holds an enormous amount of data, but there is so much more at stake than just the computer systems,” Lee said. “All their medical systems are technology-based. To lose those would be catastrophic.”

And though not all situations are life-or-death, Lee does emphasize that any kind of property loss could be crippling. “On a granular scale, you look at everything from your car to your security system. All data storage points could be controlled and compromised at some point.”

The Future of Cyber Liability

According to Lee, the Cyber product, which is still in its infancy, is poised to affect every line of business. She foresees underwriting offering more expertise in crime and becoming more segmented into areas of engineering, property, and automotive to address ongoing growing concerns.”

“Cyber coverage will become more than a one-dimensional product,” she said. “I see a large gap in coverage. Consistency is evolving, and as technology evolves, we are beginning to touch other lines. It’s no longer about if a breach will happen. It’s when.”

About Nationwide’s Cyber Solutions

Nationwide’s cyber liability coverage includes a service-based solution that helps mitigate losses. Whether it’s loss prevention resources, breach response and remediation expertise, or an experienced claim team, Nationwide’s comprehensive package of services will complement and enhance an organization’s cyber risk profile.

Nationwide currently offers up to $15 million in limits for Network Security, Data Privacy, Technology E&O, and First Party Business Interruption.

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Products underwritten by Nationwide Mutual Insurance Company and Affiliated Companies. Not all Nationwide affiliated companies are mutual companies, and not all Nationwide members are insured by a mutual company. Subject to underwriting guidelines, review, and approval. Products and discounts not available to all persons in all states. Home Office: One Nationwide Plaza, Columbus, OH. Nationwide, the Nationwide N and Eagle, and other marks displayed on this page are service marks of Nationwide Mutual Insurance Company, unless otherwise disclosed. © 2016 Nationwide Mutual Insurance Company.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Nationwide. The editorial staff of Risk & Insurance had no role in its preparation.




Nationwide, a Fortune 100 company, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poor’s.
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