Highlighting inescapable consequences of concentrations of knownrisks, the lurking dangers of unforeseen ones and even potentialreputational disasters, two industry veterans say the world isgetting riskier even as technologies emerge to make aspects of ourlives safer.

“On balance, it's far, far riskier,” says Patrick G. Ryan, thefounding chair of Ryan Specialty Group and former chair and CEO ofAon Corp., weighing safer workplaces, automobiles and strongerfinancial institutions (including Lloyd's) against rapidly growingrisks present in cyberspace and evolving from the “incredibleinstant communication available” in the modern world.

“The risk of the unforeseen and the unpredictable has gottenmuch bigger,” says William R. Berkley, chair and CEO of W.R.Berkley Corp., highlighting risk concentrations and riskcorrelations that cannot be diversified away.

This week's edition of National Underwriter magazinefeatures the responses of more than 30 thought leaders whounderstand something about the business of risk to a singlequestion: Is the world becoming safer or more risky?

Seethe responses of 30+ industry leaders

“A tornado or hurricane isn't a particular risk. Thatrequires our judgment in figuring out the probability of that eventoccurring and the level and exposure you have to it,” Berkley says.“That has always been around in the insurance business.”

“Risk, in my view, is possibility of the unforeseen orunpredictable event,” Berkley says, starting off with a definitionthat distinguishes true risks from predictable events.

Basing their opinions on more than 40 years of service to theinsurance industry, two of the most recognized executives in theworld of specialty insurance, Ryan and Berkley, voted with themajority—saying the world is getting riskier—peppering theiranswers with different examples of known and previously unknownrisks that damaged individuals and entire industries.

Ryan, the broker executive, starts his answer in cyberspace,offering the example of an e-mail he received from a friend a dayearlier to highlight the growth of an emerging risk issue. “I'vebeen hacked,” it said, Ryan reports, noting that network-securityspecialty-insurance coverages are now gaining traction amonginsurance buyers as the risk becomes well known.

“Then you have something like the Murdoch issue,” he says,referring to recent news of the phone-hacking scandal in RupertMurdoch's publishing empire—and using the example not to illustratesecurity risk, but brand risk instead.

“A brand can get attacked quickly, and [the information will]move all around the world,” he says. “You can see Congress makingits sausage in public because there's such a demand forinformation,” he says, speaking to NU as the debate overthe debt ceiling raged in Washington.

“It's going to continue to get worse,” he says, predicting thelevel of brand risk has not peaked. “We're all vulnerable to theactions of one employee, or a few.”

Berkley, the underwriting executive, turns theclock back three years to frame his response, focused on financialrisks.

“The most important thing we learned in 2008 is that independentrisks—or risks we thought were independent—have a much highercorrelation than we expected,” he says, referring to consequencesof the subprime crisis, which would explode into a global financialcrisis. “Where you thought you could have a diversified investmentportfolio, everything went to heck all at once,” he says.

Berkley, who spoke to NU a day after the stock marketplunged more than 500 points, fueling some economists' forecasts ofa second recession, uses the prior day's events to exemplify therisk he describes. “Yesterday, every class of asset went away—gold,commodities, stocks, everything. The only thing you could haveowned was U.S. Treasuries. But if you owned those, you'd be losingmoney every day, as opposed to just losing your money when riskoccurs.”

People buying U.S. Treasuries weren't protecting against therisk of loss, but instead were just changing their positions fromthe large risk of volatility to the everyday risk of not making anymoney.”

“We have more risk today because there's less predictability,more volatility, and larger swings in volatility in financialmarkets and in [insurance] loss exposures.”

“A billion-dollar loss is just not an unbelievable event anylonger,” he says, turning his attention from financial losses toinsurance property losses, and to concentrations of values thatcreate more volatility in loss-damage totals.

“If you look at NOAA [National Oceanic and AtmosphericAdministration] statistics for frequency of tornadoes, 2011 isn't aparticularly high-frequency year,” he observes. It was high, butthe number of tornadoes was higher in 1974. And in the 1940s and1950s, frequencies were higher for three or four years, hereports.

“Two things have happened. First, [property] values have changeddramatically and we haven't recognized those value changes.” Inaddition, “concentrations of values have changed dramatically,”Berkley says.

“We just don't have all those small towns and the spreads wehad. Natural disasters, when they hit in a concentrated area, costmore money.”

As a consequence, insurers and reinsurers require more capitalto survive, he says, recalling that $1 billion capital base wasrequired to participate in the reinsurance market back in 1986.“That's not a serious player anymore, and that's because of thevolatility,” he says.

Adding to his tally of increasing risks, Ryansimilarly highlights the “tremendous flocking by people to be partof major coastal populations”—a trend he says is worldwide. “Peopleare living and working in much more dangerous locations. It's aphenomenon that's not slowing down. It's accelerating.…”

“The world is riskier, but they're ignoring the risk,” he says,also noting that despite the fact that “the earth has been openingup around the world,” the take-up rate for earthquake insuranceremains low.

“We have just been really fortunate—it sounds terrible—that ourhurricanes are limited to mostly residential damage. We haven't hadreally serious industrial damage,” he says, contemplating thepotential damage from a storm that ran up the East Coast, heavilypopulated with industrial exposures.

In addition, Ryan says “the problems that we labored through inthe 1970s and 1980s” continue, pointing to systemic risks likeasbestos—risks impacting entire industries at once. Lawyers stilladvertise on television to exposed workers, he notes, adding that“systemic risk is global today.”

“We don't know where the next systemic risk will come from, butwhen it hits, it gets viral very quickly.”

Offering an event that touched him personally to support theviews on systematic and brand risks, Ryan recalls the “systematicrisk created in the Spitzer period, which hit the [insurance]industry.”

“It hurt certain people harder than others, but it did put acloud over the industry,” he says. Everything got resolved, “butyou have to look back on brand and what kind of damage, if any,lingers from that period.”

Finally, like Berkley, Ryan points to a final overarchingrisk—the risk of the unknown. “It is not that far-fetched to thinkthat businesses will be faced with a growing number of crises inwhich they have to deal with very vexing issues that can come outof nowhere,” says Ryan.

“We've seen where those can become broad issues that impact alarge number of people,” he says.

Berkley notes that “everyone's models are geared towardwhat we can think of.”

“If we look at what really happens, it isn't what we can thinkof. It's always the unforeseen,” Berkley concludes.