Property and casualty coverage has always worked on the premise that a given risk exposure can be adequately quantified if there is sufficient historical data and a predictable pattern of behavior, thereby enabling insurance companies to forecast future losses and price the risk appropriately. Natural disasters like earthquakes and hurricanes have left behind a trove of data from which calculations for risk tolerance have been established and followed by carriers all over the world.
To date the biggest liability catastrophe is asbestos. It has cost the industry about $85 billion over the past few decades, according to a 2015 Best’s Special Report. So when the industry considers what future, huge potential liability threats might occur they tend to say they’re looking for “the next asbestos.
But it’s often hard to predict casualty catastrophes. When an emerging and uncertain exposure does arise, companies often decline to write the business, mitigating their risk. There is a new train of thought though that suggests an approach using big data and forward-looking modeling techniques to further examine emerging exposures will give property and casualty insurers the ability to assume more controlled risk.
This offers the potential to fill gaps in coverage for exposures that were previously deemed too risky or unknown to insure for businesses in many different sectors.
The April issue of Best’s Review put together a list of top emerging risk groups where accumulation of risk is at its highest. Recognizing potential catastrophes is a good exercise for all businesses in terms of understanding what exposures could emerge for certain industries and the cascading effect any one of these scenarios could have on your particular organization.
The Next 9 Biggest Potential Casualty Risks
- Cybersecurity – Loss of data from hacking or taking control of self-driving cars or ships
- Climate Change – Liability of carbon-emitting companies for changing weather patterns
- Earthquakes – Liability of companies who are using fracking techniques that cause earthquakes after fluid injections
- Endocrine Disruptors – Substances such as BPA used widely in plastics which affect hormones and which have been linked to birth defects, cancer, developmental disorders, etc.
- Foodborne Illness – Food chain restaurants where e.coli or norovirus become widespread
- Pandemic – Zika virus giving rise to claims over birth abnormalities
- Traumatic Brain Injury – Liability for athletes who have concussions caused by frequent head contact while playing a sport
- Post-Traumatic Stress Disorder – Potential causes from crime, accidents, and abuse
- Police Brutality – Rise in complaints over law enforcement treatment causing bodily injury
The list provides an impetus for businesses to start a conversation within their own organizations or with an insurance agent to bring to light any vulnerabilities they may have. The most frequently publicized of the above mentioned exposures is cyber liability. Small and mid-size businesses are more frequently targeted by cyber criminals because they typically do not have the security or firewalls in place of large-scale organizations. What is your business continuity plan if your data is hijacked or stolen? Does your insurance portfolio provide financial protection in the event you are named in a lawsuit as a result of the data breach? Looking at future potential for loss scenarios and calculating their impact is a proactive approach to mitigating your risk.
Your insurance agent can assess your risks and help you protect your business against current and emerging exposures. To find an agent near you, visit acadiainsurance.com
Acadia Insurance is pleased to share this material with its customers. Please note, however, that nothing in this document should be construed as legal advice or the provision of professional consulting services. This material is for general informational purposes only, and while reasonable care has been utilized in compiling this information, no warranty or representation is made as to accuracy or completeness.