Terrorism and Cyberattacks Are Top Risks for Reinsurers

Clients still don't know how much cyber coverage they need: GC

A new report from Guy Carpenter says the reinsurance sector’s biggest threats are terrorism, cyber attacks and changes to how they pay for long-term care.

The report divvies the emerging risks into categories, labelling terrorism an “aggravating” risk, because it is “relatively well-known but their incidence and impact are becoming potentially more serious.”

It adds that terrorism insurance also faces the uncertainty of the Terrorism Risk Insurance Program Reauthorization Act, which is set to expire at the end of the year and which has not yet been renewed.

Read: When Do Companies Choose to Buy Terrorism Insurance?

Cyberattacks (a “technological” risk, for obvious reasons) are also top-of-mind for governments and corporation, but Guy Carpenter notes that many parties “are uncertain of how much coverage to acquire and whether their current policies provide them with protection.”

The final category, “crystallizing” risk, includes changes to the way bodily injury claims are paid out. In several British cases, the report notes, “claimants are now highly likely to opt for an annuity/periodic payment order (PPO) rather than a lump sum.

Read: Demand for Terrorism Insurance Strong, But TRIPRA Extension Needed 

“As a consequence, the uncertainties that previously had been transferred to the claimant are now retained by the insurer and to a certain extent, its reinsurers.”

“Whatever the category of emerging risk, the main challenge lies in modeling and quantifying the potential impacts. Only in this way can insurers leverage their key capability, which is the creation of value by risk management,” said Morley Speed, managing director, GC Securities.

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