Industry Issues | ERM & Emerging Risks

ERM News: 15 Emerging Risks Worth Watching That Are Not Cyber

Emerging Risks

15 Emerging Risks Worth Watching That Are Not Cyber

The Insurance Journal recently surveyed insurance experts about what they see as the most important emerging risk for the property/casualty insurance industry. As expected, consensus formed centrally around cyber.

But some experts also raised attention to a variety of other emerging risks.

PCI's Robert Gordon responded that the greatest industry vulnerability is the constantly evolving governmental actions. Government imposition of retroactive liability or limits on the ability of the marketplace to price risk can threaten marketplace stability. Industry security is also impacted by the effectiveness of government security policies preventing terrorist attacks - particularly cyber warfare. PCI is ever vigilant, working with policymakers to prevent or at least help our members mitigate and manage the next asbestos, superfund, or 9/11 solvency threat. Our members are also very focused on the current technology race that is driving massive insurer investment in IT and changing business strategies and platforms to meet escalating consumer expectations. Emerging government and technology risks intersect in the cyber world, with PCI members' chief risk officers most worried about aggregate losses and direct company exposure to a large-scale cyberattack.

Other emerging risks cited include:

*D&O Privacy

Privacy-related concerns may already represent a potential new source of corporate liability exposure. Recent events underscore how claims that client and customer information was mishandled can lead to bad publicity, a corporate crisis, and even significant D&O litigation.

*Sandbox Trap

Some traditional carriers are pushing for laxation of rules and momentum exists for creating regulatory sandboxes for new companies and distributors that may impact regulation that protects companies and consumers.

*Tax Accounting

The Tax Cuts and Jobs Act took effect on Jan. 1, 2018, and has had an immediate impact on accounting professionals because of the large overhaul on the U.S. Internal Revenue Code. Advisory-related risks associated with fully educating clients and managing client expectations could arise, as well as increased risk of error in the preparation of the tax return itself.

*Regulation Fragmentation

Regulatory fragmentation from state to state in the area of data and cyber security, in addition to the many differences with the EU's General Data Protection Regulations (GDPR) around processing personally identifiable data (PII).

*Policy Deficiencies

Industry competition focused only on price and so-called (insurtech) convenience.

*Irrelevant Policies

Ability of insurers to adapt quickly and effectively to dramatic societal changes threatening to breach traditional policy boundaries and lines of business.

*Fundamental Auto

The fundamental changes to autos and the auto business in the next decade will provide opportunities and threats to the auto insurance business.

*Unprotected Assets

The higher the digital asset relevancy, the bigger and more articulated the need to protect it.

*Risky Playgrounds

Children's playgrounds, with features including spiked nails and steep drops, have been gaining popularity in the UK and are coming to the U.S.

*Dockless Scooters

Electric scooters are popping up in urban areas across the country. Users pay through an app with a credit card and do not have to return the scooters to a particular location, sometimes "abandoned" on sidewalks and in doorways.

*Driving Deliveries

Rising demand for fast and free home and work delivery of retail goods.

*Compliance Witnesses

Employee attrition related to co-worker misconduct and the failure of compliance to address it.

*Coastal Communities and Property Values

Recent studies suggest that the threat of rising seas is undermining property values in coastal communities.

*Smart Contracts

Smart contracting based on digital ledger or blockchain technology holds great promise for the insurance industry - benefits of immutability, transparency and decentralization - but may also present concomitant risks including threat to privacy protections over the blockchain.