Insurers use diverse perspectives to identify emerging risks

CHICAGO – Insurers face numerous emerging risks, but they can use diverse perspectives and a disciplined approach to mitigate the exposures, insurance executives said.

Regulatory controls, though, can sometimes hinder the process, a former regulator said during a panel discussion Tuesday at the American Property Casualty Insurance Association’s annual meeting in Chicago.

Preparation for various perceived threats can help insurers prepare for emerging risks, said Ann Chai, chief risk officer at Zurich North America in Schaumburg, Illinois.

For example, insurers and risk managers have been concerned for several years about solar flares and how they could disrupt cellular networks and satellites, she said.

To better prepare for the exposure, the industry performed various tabletop exercises to test the sustainability of IT systems in the event of solar flares, Ms. Chai said.

“A lot of the tabletop exercises that we did and worked with our customers on to make sure they are resilient came in handy when we had CrowdStrike,” she said, referring to the widespread computer system disruptions in July.

“It’s about the discipline of preparedness,” Ms. Chai said.

Insurers can also bring together diverse disciplines to assess possible risks, said Stephen Marohn, Columbus, Ohio-based president of specialty property/casualty at The Hanover Insurance Group Inc.

Experts from underwriting, risk engineering, claims and legal can provide different perspectives on potential risks, he said.

“Then you can take a step back and assess those risks and figure out how you want to manage them and mitigate them,” Mr. Marohn said.

Through risk pricing, insurers can help broader society assess the costs of emerging risks, said Terri Vaughan, a board director for various insurance industry companies and former CEO of the National Association of Insurance Commissioners.

“The more that we interfere with pricing and underwriting mechanisms, the more we screw up that very, very important transparency goal,” she said.