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FROM THE EDITOR
Compiled by staff from news and wire services.
The Aggravation of
The tendency to seek bonds and
commonality with others is human.
But as the scenarios and
observations in our August Black
Swan issue illustrate; now is a
time for building walls, creating
boundaries and ensuring a little
distance: The threat that the
combination of interconnectivity
and vulnerability will cause massive
disruptions of either the cloud or the
grid is too great not to do otherwise.
Should there be a successful attack
on cloud providers — one that results
in days of business interruption
— those that don’t examine their
contracts and insurance policies to
adequately spread their risk will be
sorry they didn’t.
As I write this, carriers are no
doubt moving as quickly as they can,
hopefully aided by good models,
to determine their aggregation
risk should there be a major cloud
Insureds would do just as well to
make sure their customers don’t hold
them accountable if the cloud goes
Build a better mousetrap. Spread
your risk. There is no off-the shelf
product that can do this for you.
Should the grid fail, either
through a willful act of destruction,
a storm, or some other calamity,
business resiliency plans will be
tested like never before.
This is a great time to get creative
about energy sources. Owning your
own set of solar panels may never
have made more sense.
The risks outlined in this issue
look huge. But they are manageable.
That’s the good news.
RIMS SUPPORT FOR UNITED
In an official letter to The Honorable
Steven Mnuchin, Secretary of the U.S.
Department of the Treasury, RIMS
president Nowell Seaman expressed
the risk management society’s support
for the recently proposed U.S.-EU
Covered Agreement on reinsurance.
He cited four main benefits of
the agreement: eliminating collateral
requirements that would result
in additional capital, increasing
reinsurance capacity, requiring
the appointment of insurance
commissioners for service, and
streamlining the dispute process by
clarifying jurisdiction and payment of
“For risk professionals to support
their organizations’ expansion into
global markets, it is important that
RIMS advocates for regulation that
facilitates opportunities for our
members to effectively achieve their
objectives,” Seaman wrote.
INDUSTRY CAN LEARN FROM
In a recent briefing, A.M. Best
highlighted the recent WannaCry
ransomware attack as a learning
opportunity for the insurance
industry. While the industry has
viewed cyber coverage as a business
opportunity, it has been cautious in
underwriting the risk due to the lack
of loss history and uncertainty in the
scope of exposure.
The ratings agency said the attack
could help the industry develop clearer
definitions and policy language and
gain a better understanding of the
The WannaCry attack offers teachable
moments for cyber insurers.
extent of potential loss.
The WannaCry attack spread
with unanticipated speed, delaying
medical services, disrupting major
telecommunications networks and
halting manufacturing. The aggregated
loss, including ransoms and potential
class action litigation could be huge,
though insured losses will be low due
to low limits of cyber coverage.
REPORT IDENTIFIES TOP EMERGING
RISKS OVER NEXT THREE YEARS
A recent crowd-sourced report from
Swiss Re identifies the emerging risks
expected to have the most impact on
international corporations over the
next three years.
Inflation, which will affect insurers’
profitability, was a top risk. Long-term
liabilities including life, casualty and
asset management were also identified.
Protectionist regulatory policies could
also restrict market access and the flow
of capital, weakening international
business models. Changing regulations
and a fragmented approach to
enforcement could also limit insurers’
and reinsurers’ ability to stabilize
financial markets and lead to less
efficient risk pools, the report said.
The exponential growth of data
sets generated by and stored in cloud
services also present a variety of
risks, including cyberattacks and —
potentially — power blackouts.
MODERATION IN CONTINUED
COMMERCIAL RATE DECLINES
Global insurance rates fell 2.3 percent
for the first quarter of 2017 compared
with the previous quarter’s decrease
of 3.1 percent, according to Marsh’s
Global Insurance Market index.
It was the third consecutive quarter
in which global casualty rate decreases
moderated as they fell 0.6 percent,
mainly due to the first increase in
U.S. casualty renewal rates since the
third quarter of 2014. Renewal rates
increased on average by 0.4 percent in
the United States.
The index also found competitive
global commercial prices have helped
produce an industry combined ratio
slightly above 100, but “surplus
capacity is now 20 percent greater than
it was in 2012, the last time industry
combined ratios exceeded 100.”
POLICY IS FIRST OF ITS KIND
AIG has partnered with IBM to
develop a “smart” insurance policy
that uses blockchain technology
to manage complex international
coverage, the companies announced.
The partners launched a pilot of the
“smart contract” multinational policy
for Standard Chartered Bank PLC.
The Standard Chartered policy
uses blockchain to facilitate sharing of
real-time information for a main policy
written in the UK, and three policies in
the U.S., Singapore and Kenya.
IBM has been partnering with
companies in various industries,
including Danish transport company
Maersk, to create blockchain-based
products that can streamline complex
international dealings across sectors.
Blockchain technology, which
powers the digital currency bitcoin,
enables data sharing across a network
of individual computers. It has gained
popularity due to its usefulness in
recording and keeping track of assets
or transactions across all industries.