Cyber attacks, terrorism cited as top emerging risks for 2015: survey

Four in 10 surveyed insurance and reinsurance executives ranked cyber attacks as the most threatening emerging risk to the industry in 2015, note findings of new survey released Wednesday by Guy Carpenter & Company LLC.

Respondents for the company’s third annual survey – 111 insurance and reinsurance professionals were polled at the 2014 PCI Annual Meeting in late October – were asked to identify what they believe are the key drivers and threats to profitable growth in the industry for the year ahead.

Overall, the top three most threatening emerging risks ranked by respondents were cyber attacks (40%), terrorism (31%) and climate change (29%), according to a statement from Guy Carpenter, a global provider of risk and reinsurance intermediary services, and wholly owned subsidiary of Marsh & McLennan Companies.

Andrew Marcell, managing director and chief executive officer of Guy Carpenter’s U.S. operations, called cyber attacks one of the most serious economic and national security challenges facing the insurance industry, governments and businesses around the world.

“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 modelling and quantifying the potential impacts. Assessing and managing current and future risks will continue to be critically important for the industry to realize its growth objectives,” Marcell said in the statement.

With regard to the biggest threat to plans for growth in the coming year, 30% of surveyed executives cited undisciplined and unprofitable underwriting as the leading threat, 22% pointed to regulatory and rating agency changes, 19% noted global economic uncertainty (up from 12% in 2013, when there were 115 respondents), 19% cited catastrophe/non-cat losses (low, as in 2013, perhaps because of the relative low insured Cat losses at the end of this Atlantic hurricane season), and 11% noted operational inefficiencies (down from 15% in 2013).

On a more positive note, respondents cited some opportunities for profitable growth next year, including 40% who saw new products as the biggest opportunity to expand their business in 2015 (compared to 24% in 2013).

Other identified growth areas included new geographic markets (noted by 23% of respondents), new distribution channels (17%), and mergers and acquisitions (14%).

And if a respondent had a blank cheque to invest in his or her firm? A little less than four in 10 – 38% – reported that they would spend the extra resources on talent and retention, while 37% said bolstering information technology would be the top priority (down from 39% in 2013).

“The insurance industry continues to see significant opportunities to aggregate and analyze massive amounts of data and harness this information quickly to respond to changes in the market and gain a competitive advantage,” Marcell noted in the statement.

“Big data without analysis and interpretation, however, is just noise. This is where having strong talent and strategic partners becomes critically important,” he emphasized.