Cyber attacks and terrorism may be shaping up as the big emerging risks reinsurers face in 2015.
About 40 percent of industry respondents to a recent Guy Carpenter & Co. survey said cyber attacks would be the largest emerging risk coming to the forefront next year. Another 31 percent placed terrorism at the top of the list.
The remainder—approximately 29 percent—pointed to climate change as the most threatening emerging risk in 2015.
Survey results came from 111 insurance and reinsurance professionals at the recent 2014 PCI Annual Meeting in Scottsdale, Ariz.
While the findings are compelling, they are also subjective, because the sample is relatively small and specific to the PCI insurance and reinsurance audience, said Robert Hartwig, president of the Insurance Information Institute. Top risk issues heading into 2015 may also differ depending on the venue, he added, such as a conference with just reinsurers or multinationals.
That said, he offered that the top Guy Carpenter survey responses made sense all the same.
“Cyber has been much in the news, and it is also a product the industry is looking to offer,” Hartwig told Carrier Management. “Only a limited number of carriers have a cyber product today, but many are thinking about it.”
He added that there is an ongoing question as to whether cyber coverage is reinsurable, even as cyber attacks continue to increase.
“It is a growth opportunity, but the headlines are scary,” he said.
Terrorism is rightly high on the list as well, Hartwig said, because Congress continues to delay action on renewing the Terrorism Risk Insurance Act, or TRIA, which provides federal reinsurance in the event of a major terrorist attack. It is slated to expire again on Dec. 31, and some industry insiders worry that Congress may only grant a short-term extension, contrary to what insurers and businesses want. Others expect TRIA to be renewed by mid-December.
“I don’t think CEOs think terror [attacks] are more likely than two years ago,” Hartwig said. “They are reacting to the looming expiration of TRIA,…and the only hope of extending it lies with a lame duck Congress, with which it is not completely obvious that they will act in such a way that they produce a long-term extension of the program.”
Andrew Marcell, managing director and CEO of Guy Carpenter’s U.S. operations, said in a prepared statement that there are ways to address these emerging risks but that it will not be easy to do so, in part due to the lack of historical precedence.
“The challenge in facing emerging risks such as cyber attacks or terrorism, where there is less of a historical precedence and data available, rests in modeling and quantifying the potential impacts,” Marcell said. “Assessing and managing current and future risks will continue to be critically important for the industry to realize its growth objectives.”
That process will be particularly important for cyber attacks, Marcell added.
“Cyber attacks are one of the most serious economic and national security challenges facing not only the insurance industry but governments and businesses around the world,” Marcell said.
Guy Carpenter is the reinsurance brokerage division of Marsh & McClennan Cos.
Source: Guy Carpenter