Category Archives: Insurance

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Looking Back at the Big Flood: Time to Examine Your ‘Human Supply Chain’

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The devastation left behind after Hurricane Harvey is a reminder that people are a critical link in the effort to build community storm resilience. We often remind our customers that to prepare for a disaster, they need to consider their supply chain risk—will they be able to access goods and services in the aftermath of a storm.

One area that is often overlooked is what is often called the human supply chain, which consists of your employees, customers and others members of your community.

Beyond ensuring that your employees are safe, business owners may need to consider other concerns: Do you have a plan that will allow your employees to continue working during the recovery? Can they work remotely? Are your employees trained in disaster preparedness? If your business relies on local customers, are they able to access your goods and services? What about rescue personnel and other business owners that provide goods and services to support the community?
Think of the human supply chain as a network of individuals who help your business to survive and continue to thrive after a disaster, like Hurricane Harvey, which dumped trillions of gallons of water on Texas a year ago.

Ensuring that this living, breathing supply chain remains connected is one of the recommendations culled from 13 in-depth studies that Zurich has produced on the impacts of natural disasters around the world. The latest report, “Houston and Hurricane Harvey: a call to action,” was released at the start of the 2018 hurricane season.

Zurich has developed a methodology called the Post Event Review Capability (PERC), which is an approach to understanding why a hazard becomes a disaster, and then from that, identifying entry points for building resilience.

A report released earlier this month highlights some of the lessons learned from these PERC studies and encourages businesses and communities to focus on resilience to prepare for future storms.

The report identifies some common truths about major storms:

  • Every dollar spent on disaster preparedness saves four dollars in future losses;
  • Early warnings paired with contingency and emergency planning can save lives and protect businesses; and
  • Risk managers and communities must “build back better” to strengthen resilience after a disaster strikes.

The report also emphasizes the human element in storm preparation and recovery. For example, one of the central lessons that emerged from the PERC studies is that successful response operations are mostly reliant on institutions. Providing equipment, access to food and showers, assisting with cleanup and offering paid time off for employees can go a long way towards supporting a community and creating a culture of assistance.

Business leaders should provide employee readiness training, the report concludes. Some companies already do this, making preparedness a part of business as usual. One such company regularly schedules “disaster recovery days.” The company will randomly announce, “It’s flooding today, work from home,” to practice employee readiness for the real thing.

This recognition that humans play a critical role in the recovery process is partly why Zurich continues to support SBP, an organization that seeks to shorten the time between disaster and recovery.

Zurich has worked with SBP since 2009, helping the nonprofit bring hundreds of families back home after Hurricane Katrina. SBP has remained in Southeast Texas since Harvey to help aid in the recovery efforts there.

Recognizing the need for home and business owners to identify and mitigate their risks prior to disasters, Zurich in 2014 committed a $3 million grant to SBP through its Z-Zurich Foundation. The grant helped fund SBP’s Disaster Resilience & Recovery Lab, an initiative through which SBP trains home and business owners in 30 communities at risk for disasters across the United States over the course of three years.

In the future, hurricanes will continue to wreak havoc, destroying homes and lives, damaging critical infrastructure and shuttering businesses, but it’s important to remember that humans are the key to resilience. Keeping people safe, engaged and part of the recovery process can help ensure that communities remain resilient in the face of major storms.

Jacksonville Murders Force Reassessment of Active Shooter Risks

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A mass shooting at a video game tournament in Jacksonville, Florida on Sunday has once again shined a spotlight on the growing risks businesses face even as they conduct normal operations.

A lone shooter, 24-year-old David Katz, opened fire on football video gamers at a pizza restaurant, killing two and injuring at least nine before turning the gun on himself in an adjacent restaurant. Reports indicate that Katz was allegedly upset at being eliminated from the tournament. One of the deceased victims was a player who defeated Katz in a prior tournament, leading investigators to believe there had been a motive for the shooting. 

The effect of mass shootings has left Florida numb, especially since this follows the Feb. 14 massacre at Marjory Stoneman Douglas High School in Parkland, which left 17 dead and 17 injured; and the Pulse Nightclub shooting in Orlando in 2016, leaving 49 dead and 53 injured. These tragedies demonstrate that no business or venue should consider itself inherently safe and serve as reminders to risk professionals in all sectors that their organizations could be vulnerable to a mass shooting.

Public Safety
The shooting was unique in that it occurred during a live broadcast of the football gaming tournament. Gunshots were clearly audible as players delivered commentary during their simulated contests, prompting them to take cover and call the police, who responded minutes after receiving the first call.  

The incident marked the 235th mass shooting in the U.S., according to the Gun Violence Archive, an organization that collects information about gun-related violence in the country. The FBI and the United States’ Congressional Research Service consider a mass shooting to be one that injures at least four people, excluding the shooter.

In light of this increasingly commonplace threat, understanding how to respond to an active shooter situation can mean the difference between life and death. The U.S. Department of Homeland Security has provided the Run.Hide.Fight plan for guidance in what to do in an active shooter scenario.

Mental Health
As more information about Katz emerges, the links between gun violence, mental health and public safety in the United States become more evident.

CNN reported that Katz had a history of mental health issues and legally purchased a 9mm handgun and a .45-caliber handgun in Maryland. How he transported the weapons and ammunition across state lines and into the event are details still being investigated.

CNN also obtained police records that show 26 calls to the police from the Katz family home in Columbia, Maryland, from 1993 to 2009, for issues ranging from “mental illness” to domestic disputes. At least two of those calls involved Katz arguing with his mother, although none of the reports provided to CNN indicate any physical violence.

Since 2013, residents in Maryland must obtain a handgun qualification license from the state police before purchasing a pistol or revolver. That means Katz would have submitted his fingerprints, undergone a background check (which includes disqualifying individuals who were voluntarily or involuntarily hospitalized for more than 30 days), and passed a firearms safety training course to buy those guns. This scenario has been met with wide skepticism. And since some of his documented mental health issues may have occurred before the gun laws were revised, the disqualifications may not have applied to Katz.

“That clearly is an area in need of reform,” said Democratic Sen. Robert Zirkin, who chairs a Senate committee that handles gun laws.

Insurance
Risk Management magazine recently reported that companies may not be aware of potential gaps in their coverage or that the limits of their coverage, when considering active shooter incidents, are insufficient.

“You might have property coverage, but you might not have assessed your properties in specific locations against this type of risk,” said Robert Hartwig, clinical associate professor of finance and co-director of the Risk and Uncertainty Management Center at the University of South Carolina’s Darla Moore School of Business.“You almost certainly would not have crisis management under your ordinary property or liability policy. So these represent gaps that, as a risk manager, you might be unaware of.”

Beyond property damage, it can be unclear what is covered after a shooting. For example it is difficult to establish the liability for allowing an assailant on a property. “Unfortunately, the increase in the number of active shooter situations has probably gotten ahead of the law on this issue,” Hartwig said. He added that a number of states do allow individuals to carry concealed weapons much, if not all, of the time. “So it’s not necessarily the case that, just by entering the premises with a weapon, individuals are violating the law. Therefore, a business is not necessarily negligent by allowing an armed individual to enter its premises.”  

Cyber Insurance Strategies Explored: RIMS Report

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High-profile data breaches have been making headlines recently, and their damage can transcend industries, which is why cybersecurity is often a top priority for risk managers. With many traditional insurance policies no longer responding to or outright excluding cyber events, risk professionals must understand their options to ensure the organization is protected in the event of a data breach.

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A new report by RIMS, A Guide to Cyber Insurance, provides a roadmap for determining the type of coverage risk managers need in the fast-changing world of privacy, data protection, and cyber risk management. The study serves as a reference for risk professionals who are exploring options to effectively manage cyberrisks that are uncovered or not addressed by the organization’s existing risk management program.

Topics include:

  • The cyber insurance application process
  • Procurement of insurance
  • Management of cyber claims
  • Third-party coverage
  • Litigation strategies, and other pertinent details

“While cyber risk management policies are necessary for every organization, reducing a category of risk to zero is impossible,” the report notes. “Cyber insurance can help cover the gaps between a robust risk management program and any remaining risks.”

The report also features case reviews in the areas of cyber policy coverage litigation, negligence, computer fraud, technology errors and advertising and personal injury coverage. “While the overall decision-making process is much the same as with other litigation decisions, certain factors are more complex in the cyber insurance context compared to other insurance disputes,” the authors note.

The Guide doesn’t only focus on insurance. It also features helpful tips when implementing a strategic risk management program characterized by a cybersecurity framework. Pre-event planning and preparation, penetration testing and response ideas are offered as well.

“Following the purchase of some form of cyber coverage, risk professionals need to be prepared for the worst: a cyber event and any resulting claims,” the report states.

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“An organization needs to understand both the risk it faces and the coverage options available to ensure that the cyber policies it purchases provide the necessary coverage when it experiences the inevitable data breach or other cyber events.”

A Guide to Cyber Insurance is authored by Bradley Arant Boult Cummings law firm members: Dylan C. Black, A. Kate Margolis, G. Benjamin Milam and Emily M. Ruzic.

The report is currently available to RIMS members.

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To download the report, visit the RIMS Risk Knowledge library at www.RIMS.org/RiskKnowledge. To learn about other RIMS publications, educational opportunities, conferences and resources, visit www.RIMS.org.

Total Cost of Risk Drops for Fourth Straight Year, RIMS Finds

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The risk management profession is proving its resiliency. Even in the face of major hurricanes, technological influence and the seemingly common threat of international trade wars, 2017 saw the total cost of risk (TCOR) decline for the fourth consecutive year, according to the 2018 RIMS Benchmark Survey, which was jointly published by RIMS and Advisen.

Despite these uncertainties, the TCOR per $1,000 of revenue continued to drop, the survey revealed, ending at $9.75 in 2017. The main drivers were declines in liability costs (8%), by decreases in property, liability, workers compensation, management liability, and professional liability costs, as well as overall risk management administration costs. TCOR is defined in the survey as the cost of insurance, plus the costs of the losses retained and the administrative costs of the risk management department.

The survey encompassed industry data from 590 organizations and contains policy-level information from 10 coverage groups, subdivided into 90 lines of business.

Advisen Co-Founder and Chief Strategy Officer David Bradford said market conditions are favorable for insurance buyers. “A competitive insurance market resulting from a chronic overabundance of risk capital strongly contributed to TCOR decreasing steadily since 2013,” he said. “Not even record catastrophe losses in 2017 could derail the downward trend.”

Key findings from this year’s RIMS Benchmark Survey include:

  • TCOR fell despite record-high natural catastrophe losses such as hurricanes Maria, Irma and Harvey, as well as wildfires and mudslides in California.
  • While TCOR per $1,000 of revenue fell for most industries, four—healthcare, government & nonprofit, information technology and consumer staples—saw rising TCOR in 2017.
  • As predicted in the 2017 survey, the percentage of companies buying cyber insurance continued its increase since 2011, ending at 65% in 2017.
  • In 2017, the percentage of companies buying cyber insurance increased to 65%. This trend has continued upward since 2011. Additionally, the cost of cyber insurance per $1,000 of revenue increased 33% from 2016.
  • The adoption of new technologies such as machine learning and blockchain, political instability in several parts of the world, globalization, terrorism and cyber threats are expected to further shape the risk landscape in 2018 and beyond.

Bradford noted that the traditional insurance pricing cycle may seem broken, but that term is more likely a new normal resulting from a more efficient insurance market. “The factors contributing to this more efficient market are varied and complex, but the upshot is that a hard market like that last seen in 2001-2002, when commercial insurance rates shot up 50 percent, may simply never occur again,” he said. “Prices may rise, but most likely they will be quickly beaten down by fresh capital flowing into the market. That is good news for risk managers.”

“As the tools, resources and technologies that facilitate the exchange of ideas and experiences continue to improve, risk management professionals have become better equipped to strengthen their risk financing programs and apply cutting-edge, cost-cutting strategies,” said RIMS CEO Mary Roth. “The year-over-year data available in the RIMS Benchmark Survey allows professionals to accurately set expectations, and achieve goals while designing competitive but fair insurance programs for their organizations.”

To order a copy of the 2018 RIMS Benchmark Survey, visit www.advisenltd.com/media/reports/rims-benchmark-survey/ or www.RIMS.org/book.