Insurance Jottings

Cyber-Attacks Named as Top Business Risk in US, Canada and Europe, by WEF Survey

Cyber-attacks are named as the leading risk for business executives in the United States, Canada and Europe, according to a survey of business leaders published by the World Economic Forum.

 

Globally, three of the top five risks are economic-related, with “fiscal crises” identified as the leading risk to doing business at a global scale, while “unemployment or underemployment” came in third and “energy price shock” ranked fourth.

 

These risks have strong links to social disruption and contribute to “failure of national governance” ranking fifth and “profound social instability” ranking sixth, said WEF in a statement accompanying the survey report.

 

The survey revealed the Top Ten business risks of highest concern globally are: 1. Fiscal crises, 2. Cyber-attacks, 3. Unemployment or underemployment, 4. Energy price shock, 5. Failure of national governance, 6. Profound social instability, 7. Data fraud or theft, 8. Interstate conflict, 9. Failure of critical infrastructure, 10. Asset bubble.

 

The survey report, which is titled “Regional Risks for Doing Business 2019,” further breaks down the concerns of business executives into regions.

 

Cyber-attacks are the second biggest challenge for executives overall, and the most important one for European and North American businesses for the second year in a row. (The WEF piloted its first regional risks report in 2018, which was designed to show how global risks are experienced differently by region).

 

While failure of climate-change adaption was ranked at number 21 globally, it ranked at number 8 in North America, said the report.

 

In the US, the top five risks are: 1. Cyber-attacks, 2. Data fraud or theft, 3. Terrorist attacks, 4. Critical information infrastructure breakdown, 5. Failure of critical infrastructure.

 

In Canada, the top five risks are: 1. Cyber-attacks, 2. Data fraud or theft, 3. Extreme weather events, 4. Energy price shock, 5. Failure of regional and global governance.

In Europe, the top five risks are: 1. Cyber-attacks, 2. Asset bubble, 3. Interstate conflict, 4. Energy price shock, 5. Fiscal crises.

 

Other Global Regions

Environmental-related risks are the top concerns in South Asia and in East Asia and the Pacific, with both regions having suffered devastating natural disasters and extreme weather events, said the survey report.

 

Social challenges rank high in Eurasia, affected by economic slowdown, and Latin America and in the Caribbean, where governments are still aiming to deliver critical social services.

 

In the Middle East and North Africa “energy price shock” leads the list of concerns due to ongoing price and production volatility, and in sub-Saharan Africa, where youth unemployment is more than 13%, executives are worried by their economies’ inability to create jobs, indicated the report.

 

John Drzik, president of Global Risk and Digital at a leading global broker, said: “Cyber-security remains the most concerning risk to business leaders in advanced economies, and growing technology dependence for many businesses will only amplify this. Combined with fractious geopolitical developments, and growing economic concerns, executives face a very challenging portfolio of potential threats.

 

“Business leaders should re-evaluate their underlying view of the global risk environment and make greater efforts to strengthen their corporate agility and resilience.”

 

“There is a real existential threat to businesses worldwide,” said Eugenie Molyneux, chief risk officer at a leading insurance group. “Executives are concerned that governments have too much debt to be able to afford measures that could help avoid a recession, and see cyber-attacks as the number one risk in 16 economies representing over 40% of the world’s GDP. At the same time, businesses are not even factoring in the impact of climate change over the next decade. These three risks need urgent action.”

 

Tulsi Naidu, chief executive of Zurich UK, said, the survey reveals that cyber-attacks are the most pressing risk for CEOs of the four largest EU economies — Germany, France, Italy and the UK — while data theft is ranked sixth across Europe.

 

“While organisations are increasingly alert to the impact cyber-attacks can have, many do not yet fully appreciate the dangers, and must step up their efforts to combat the threat. As such, this is an area of insurance we expect to see grow,” she added.

 

“At a time when global economic growth appears fragile, business leaders are deeply

concerned by their governments’ fiscal resilience. Meanwhile, cyber-threats remain a major risk due to their rapid evolution and increasingly disruptive potential,” said Emilio Granados-Franco, head of Global Risks and Geopolitical Agenda at the World Economic Forum.

 

“But in examining risk at the regional level, we also see various, interconnected drivers shaping diverse risks landscapes,” Mr Granados-Franco went on to say. “Only by addressing economic risks and societal, technological, and environmental risks in an integrated manner, can stakeholders truly build resiliency.”

 

Methodology

The findings of the “Regional Risks for Doing Business 2019” survey report are based on 12,897 responses from executives in 133 economies.

 

Respondents were asked to select “the five global risks which you believe to be of most concern for doing business in your country within the next ten years.” The latest edition of the survey was carried out from January to April 2019. Business leaders were asked to choose up to five risks from a list of 30, which included terrorist attacks, extreme weather events and state collapse or crisis.

 

AXA XL’s New Energy Risk plans business expansion with strategic hires

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Lloyd’s Reveals Blueprint to Build ‘Most Advanced Insurance Marketplace’

Lloyd’s has unveiled a blueprint for action to facilitate its Future at Lloyd’s project, which aims to “build the most advanced insurance marketplace in the world.”

 

This first blueprint, called “Blueprint One,” sets out six ideas of improved ways of working, with a focus on digital, data and technology to deliver greater benefits to customers. It will be updated, at least, on an annual basis.

 

Lloyd’s said Phase I of the blueprint will be delivered during 2020 and will include early quick wins, including the launch of an electronic risk exchange which could, over time, process as much as 40% of Lloyd’s risks.

 

Munich Re Syndicate will launch Lloyd’s first “Syndicate-in-a-Box” through its Lloyd’s insurer. In addition, Lloyd’s will pilot a solution that automatically triages claims to speed up settlement and introduce simplified onboarding for Lloyd’s coverholders.

 

Lloyd’s stepped up its ongoing effort to build a more efficient, simpler and less costly marketplace when it published its Future at Lloyd’s prospectus in May. After a ten-week consultation period to gather ideas for market improvements, the blueprint for those changes is being unveiled.

 

Here are the six integrated solutions Lloyd’s announced it is developing over the next year:

 

Complex risk platform

A digital, end-to-end that complements face-to-face negotiation to submit, quote, bind, issue, endorse and renew complex risks for insurance and reinsurance business. (Lloyd’s initially will invest in the next generation of the London market’s existing electronic placing platform, PPL, building its capability over time).

 

Lloyd’s risk exchange

An exchange for underwriting relatively non-complex, high-volume, low-value risks, which enables policies to be created and bought digitally. This digital exchange connects to existing systems or provides a new user interface, enabling instant search, quote, bind and issue to improve the speed of placement and customer experience.

 

Claims solution

A solution designed to transforms the claims process by automating simple claims, using straight-through processing, resolving standard claims handling on behalf of the market and empowering lead underwriters to handle the most complex claims. This solution will create a better customer experience, making it easier to track claims and speed payments.

 

Capital solution

A solution which offers alternative capital providers more options to attach risk more flexibly, for the benefit of all market participants, supported by a new capital platform. It is designed to make the market more attractive and accessible to all traditional and new forms of capital (including financial investors), while maintaining strong underwriting discipline.

 

Syndicate in a box

The blueprint described this project as a new way “to bring innovative, accretive and profitable business into the market for a set period without the need for a physical presence in Lloyd’s…”

 

Services hub

A set of high-quality, value-add services to support the market’s business, including access to Lloyd’s data, insights and analytics, business support functions, and product innovation accelerators. All these resources will be access via an online portal.

 

The Future at Lloyd’s project builds on an earlier modernisation project, the London Market Target Operating Model (LM TOM), which includes the London market’s electronic placement platform, PPL. The LM TOM is now being wound down, supplanted by the Lloyd’s Blueprint for the Future at Lloyd’s, although the blueprint is building on PPL’s capabilities.

 

Lloyd’s also announced that Munich Re will launch the first new “Syndicate-in-a-Box” through its Lloyd’s vehicle Munich Re Syndicate Limited. The new Munich Re Innovation Syndicate will begin underwriting on the 1st January 2020 with no physical presence in Lloyd’s. It will underwrite a range of innovative lines of business such as renewable energy and parametric insurance for weather risks.

 

“The extensive feedback we have received in progressing the blueprint has confirmed the preeminent place Lloyd’s holds globally in insurance and reinsurance. The plans unveiled today create execution certainty through phased delivery,” said John Neal, Lloyd’s CEO, in a statement to announce Blueprint One.

 

“The support we have enjoyed to date has been essential to delivering Blueprint One and we are seeking the renewed commitment of all market participants to partner with us to achieve our vision to build the most advanced insurance marketplace in the world.”

Lloyd’s said it is focused on leadership across three key fronts:

 

  • Improving the market’s performance
  • Delivering the Future at Lloyd’s strategy
  • Tackling unacceptable behaviour in the Lloyd’s market with robust actions to build a diverse and inclusive market in which everyone is respected and valued. (Lloyd’s this month detailed a plan to address the toxic culture of harassment, which women in a survey revealed is prevalent in the market).

 

For six months, starting on the 1st October, Lloyd’s will begin a planning phase, to develop its blueprint “to ensure we are ready to execute the plan,” said Lloyd’s.

 

London Market Comments:

 

London Market Group

“This blueprint process has demonstrated tremendous cross-market collaboration in its creation, and we are delighted that the LMG Board will become the London advisory body for the Future at Lloyd’s – representing as it does the widest possible market representation across all stakeholders in the market and across the re/insurance value chain,” said Clare Lebecq at the London Market Group (LMG).

 

London & International Insurance Brokers’ Association (LIIBA)

“The broking community welcomes the fact that the development of the blueprint for the Future at Lloyd’s has been a positive and discursive process,” said Chris Croft from LIIBA.

“For any market development, the distribution arm is at the front end of the process, getting that part right is critical to whatever Lloyd’s develops, as is ensuring any solutions developed work equally efficiently for non-Lloyd’s carriers given the global nature of our market,” he added.

 

“LIIBA members have worked assiduously in recent years to shorten the value chain that brings business to London and therefore to reduce cost and complexity significantly. Technology has a role to play in helping us reduce that further but not at the expense of the value that an intermediary brings to the process.

 

“PPL has built a significant brand and following because it works for all parts of the community. The fact we can develop something so important together has been a valuable lesson. The announcement that PPL will form the basis for the complex risk platform, and will receive investment in improving it further, is great news for the market,” Mr Croft affirmed.

 

Placing Platform Ltd

“PPL has become the platform of choice for the London market. The critical mass which the market has built is invaluable and it is entirely logical that Lloyd’s should use it as the basis for its complex risk platform,” said Bronek Masojada from PPL.

 

“One of our priorities has been to improve the user experience and build a new platform. Lloyd’s support will accelerate that process and is warmly welcomed,” Mr Masojada added.

 

“The platform’s success is dependent on all segments of the market collaborating to make it work – this is the spirit which makes change happen in Lloyd’s and the London market.”

 

The Lloyd’s Market Association (LMA)

“Lloyd’s ambition to be the most advanced insurance marketplace in the world is achievable, but will be thoroughly dependent on our ability to innovate and evolve our model so that we may continue to offer outstanding underwriting products and services to our customers. It is

absolutely right that this is the primary focus of the Future at Lloyd’s, which is why it has the broad support of the LMA and the wider market,” said LMA CEO Sheila Cameron.

 

“I am reassured that many of the comments and questions posed in our response to Lloyd’s have been addressed or acknowledged in Blueprint One,” she added.

 

“We look forward to seeing more detailed development of the six integrated solutions which will form the future Lloyd’s ecosystem and help to shape the development of some of the supporting strands such as modern risk syndication.

 

Satellite technology helps Lloyd’s speed up claims process for nat cat: McKenzie

Satellite imagery technology is a key part of the push at Lloyd’s in using technology to speed up claims payments following natural catastrophe events, according to McKenzie Intelligence Services (MIS).

 

Ocean Marine Insurers Face New Risks, Challenges in Changing Segment

Ocean marine insurance is the oldest line of insurance and today represents a small specialty line in the property/casualty insurance industry.

 

Since those early days, marine products have evolved as risks and exposures have increased in both size and complexity. The recent sailing of the MSC Gulsun, the world’s largest containership at 23,000+ TEU capacity, with cargo values well in excess of US$1 billion, is just one example of the increasing assets which are insured.

 

Today’s marine industry is facing some tough challenges. On a global basis, reports show that many lines of marine business are unprofitable and have been so for several years, including the larger lines of cargo, hull and yacht.

 

While some geographic markets as well as insurers within the market have performed better, none have been immune to the challenges facing the industry.

 

There are several reasons for this situation but a significant one has been an abundance of capacity entering the marine insurance market with relatively low barriers to entry and exit.

 

This has resulted in the “commoditisation” of this specialty line of business. In the simplest of terms, premiums have not been technically adequate to cover losses and expenses let alone provide a return for capital providers which meet their expectations.

 

As a result, the marine insurance industry is now seeing companies exit the marine market.

 

Those underwriters who remain committed to the market are addressing their portfolios and reviewing rate adequacy, expenses, terms and conditions, deductible levels, and capacity/limit deployment.

 

In the soft market many accounts were underwritten and priced based predominantly on the insured’s past loss experience. Today, underwriters appear to be more focused on the insured’s exposures, and brokers and insureds are seeing greater demands for information.

 

Natural catastrophe activity has also adversely impacted the marine insurance sector, most notably the yacht and cargo lines. The yacht market has undergone significant increases in premium, deductibles, and a lack of availability of coverage for certain vessels and geographies.

 

The cargo market insures a significant amount of property/contents in storage under warehouse/storage endorsements and “Stock Thru Put” policies. This has increased in the soft market as cargo insurers offered broader terms, greater nat cat limits, lower deductibles, and more competitive prices than were available under a property insurance policy.

 

However, there have been significant cargo storage losses as a result of the 2017 and 2018 nat cats as well as a number of well-publicised, costly fire losses in the past 12 months including Macy’s, Jim Beam, and Tyson.

 

This year has also been a very active loss year with major vessel fire casualties including the Sincerity Ace, Yantian Express, APL Vancouver, ER Kobe, Grande America, Grande Europa, KMTC Hong Kong, Diamond Highway and the APL Le Havre.

 

Tragically, some of these casualties have resulted in loss of life, injury and environmental damage.

 

Shipments of hazardous materials and dangerous goods are expected to be a factor in most, if not all, of these casualties.

 

Recently, shipping companies have taken the unprecedented step of announcing significant fines for misdeclaration of dangerous goods.

All of these casualties will result in cargo, hull, and protection and indemnity (P&I) claims. In addition, in January 2019 one of the largest and most modern new container ships, the MSC Zoe, lost 345 containers overboard in heavy weather in the North Sea while en-route from Portugal to Bremerhaven.

 

In the US market, many marine liability and P&I underwriters are dealing with challenges similar to those faced by their non-marine casualty colleagues. These include the increase in claims costs driven by growth in social inflation, medical costs, legal fees, and larger judgments and settlements.

 

All this is increasing adverse prior-year development in results for insurers. Excess marine liability insurers face similar struggles.

 

Despite these challenges, the marine industry will continue to grow and require re/insurers who can offer quality products and solutions.

 

There are emerging technologies which may enable new solutions to provide insurance products to meet the industry’s changing needs, but insurers must get the basics right first to be in a position to capitalise on future opportunities.

 

For certain, the industry will need highly qualified marine insurance professionals to address its needs and offer a sustainable approach to the business which meets the demands of the present and future.

 

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