AIG's Hancock Tackles Emerging Risks, NFIP and TRIA

NEW YORK—The past year brought a first for AIG Property Casualty—a meteorite claim filed by a Siberian warehouse insured against earthbound space debris.

“History doesn’t repeat itself; it rhymes,” quoted Peter Hancock, CEO of AIG Property Casualty, at the Annual Insurance Executive Conference held here yesterday, drawing a parallel between Mark Twain’s words and the changing global risk landscape.  

Speaking on a panel outlining emerging risks and opportunities within insurance, Hancock listed climate change, cyber insurance, alternative capacity and public-private risk transfers as trends watched by AIG’s P&C company.

“Although 2013 was mostly a benign weather year, modeling perils must make presumptions that weather events will become more severe,” he said, naming climate change and urban and suburban development as factors increasing catastrophe losses.

Cyber breach was also high on Hancock’s radar. According to the executive, about 525 breaches occurred so far in 2013, affecting companies that need to contend with different privacy and notification laws in nearly every state, as well as impending protocols for government action. The fallout from data leaks is now quantifiable, as 76% of customers will close an account if they suspect their information has been compromised, and corporate stocks drop by an average of 5% after a breach.

“It’s a real risk that is massively underinsured” with little carrier expertise and not much customer demand, said Hancock.

Turning to other risks, Hancock said public-private risk control mechanisms may ensnare the insurance industry and wider economy as the National Flood Insurance Program (NFIP) “is renewed every year despite its costs and the distortions it creates to the building industry” by allowing real estate development in flood-prone areas.

Meanwhile, the Terrorism Risk Insurance Act (TRIA) is “stuck” although “it hasn’t cost taxpayers a dime, but it is very good for society,” said Hancock. Furthermore, he said, workers’ compensation lines simply “cannot go without it.”  

The economy has spurred the industry to look towards alternative capital arrangements as a solution to low investment yields in recent years, but the executive believes it is a “temporary phenomenon driven by current quantitative easing.” 

However, he says, the insurance industry has been avoiding the investment risks that plagued the financial industry and its unwary customers prior to the recession.

Comments

Resource Center

View All »

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Get $100 in leads with $0 down!

NetQuote's detailed, real-time leads have boosted sales for thousands of successful local agents across the...

The Growing Role of Excess & Surplus Lines in Today’s...

The excess and surplus market (E&S) provides coverage when standard insurance carriers cannot or will...

Increase Sales Conversion with this Complimentary White Paper

This whitepaper will share proven techniques - used by many of the industry's top producers...

D&O Policy Definitions: Don't Overlook These Critical Terms

Unlike other forms of insurance where standard policy language prevails, with D&O policies, even seemingly...

Environmental Risk: Lessons Learned from Willy Wonka and the Chocolate...

Whether it’s a chocolate factory or an industrial wastewater treatment facility, cleanup and impacts to...

More Data, Earlier: The Value of Incorporating Data and Analytics...

Incorporating more data earlier in claims lifecycles can help you reduce severity payments by 25%*...

How Many Of Your Clients Are At Risk Of Flood?

Every home is vulnerable to flooding. Learn four compelling reasons why discussing flood insurance with...

Gauging your Business Intelligence Analytics Capabilities and the Impact of...

Big Data, Data Lakes and Data Swamps, How to gauge your company's Big Data readiness....

Extending Contact Center Capabilities Across the Insurance Enterprise

Today advancements in technology are making a big impact on business and society. To yield...

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.