What is the scariest risk in an insurance broker's area ofexpertise?

London-headquartered insurance broker Willis Group Holdings onits WillisWire blog has listed the 21 scariestrisks in the areas of expertise among its individualexperts. The risks range from bird flu to weapons of massdestruction to the Macondo Mach II oil spill disaster in the Gulfof Mexico, as well as data breaches and other risks that can gobump in the night.

Take a poll at the end and see which risk is scariest for yourbusiness.

Robin Somerville

Energy: Macondo Mach II

In the energy industry, the unthinkable has perhaps alreadyhappened: The $40 billion in losses associated with the Macondowell that blew out last year were utterly unprecedented. Most ofthat risk was uninsured, so the energy market got off relativelylightly in this case. But as the drive to drillwells similar to Macondo continues, the nightmare scenariofor the energy market is the "perfect storm" of another blowout ofa similar nature combined with a Gulf of Mexico windstorm on thescale ofa Katrina, Rita or Ike. Thatwould almost certainly lead to underwriting losses that would besufficient to prompt a potential capacity crisis…

Steve Higginson

Mining: Coal-tastrophe

When we are young, our parents calm our fears of the dark byturning the light on so we can see that there is indeed no bogeymanunder the bed. But what would happen if the light didn't come on?Scary thought. Most of the energy required by the power stationsaround the world comes from coal, and most of the coal is found inareas of the world which are prone to natural catastrophe. …Tryingto predict and manage the forces of nature is a more than difficulttask as the recent spate of unexpected natural disasters goes toprove. Trying to mitigate and manage the impact of these forces onthe coal mining industry is proving to be the challenge of themoment for miners and insurers alike…

Wendy Peters

Terrorism: 'Nuf Said

Terrorism remains a fundamental risk-management challenge in itsunpredictability from the perspective of frequency, mode of attackand target. Terrorists have used planes, mail bombs, anthrax,printer cartridges, shoes and underwear among other techniques topull off attacks in places as disparate as Oklahoma City, Madridand Sri Lanka. …Terrorists have many guises—not just the religiousextremist, but the environmentalist protecting migratory birdflight paths, the radical anti-government protestor, or the oneopposed to controversial research at a medical facility…

David Simmons

ERM: Italian Default

The threat of escalation of Europe's sovereign debt crisiscontinues to make me wake in a cold sweat. The focus has so farbeen on Greece and the Franco/German attempts to manufacture asolution that protects French banks whilst being just aboutpalatable to the German parliament and populace. But Italy is thekey—surely no central fund can be big enough to bail out an Italiandefault. So much depends on sentiment and credibility…

Richard Magrann-Wells

Financial Services: Data Breach

Nothing strikes fear in the hearts of financial managers likethe phrase "data breach." Banks, asset managers, insurancecompanies and the like, all handle volumes of private financialdata. We are bombarded every day with the news of computer hackersand viruses, but breaches can just as easily happen from lost filesor mishandled waste. Perhaps, most terrifying is that thecost of a breach keeps increasing. …When the cost of regulatoryfines, call centers and loss productivity are added in the cost canbe, well, frightening. But for a truly horrifying experience,multiply the number of your institution's customers by $200. Thiswill give you some sense of what's at stake with your networksecurity…

James Vickers

Reinsurance: Systemic Risk

Are black boxes creating Black Swans? As regulation for theglobal insurance industry tightens and converges, companies arerequired to develop and build their own internal economic capitalmanagement models around the same underlying assumptions, withcatastrophe risk assessed by the same black box vendor models. Arewe running the risk that in encouraging all companies to followsimilar risk management practices, we are creating an inherentsystemic risk which we cannot currently recognize, assess orcontrol, ironically leading to a BlackSwan scenario?

Paul Greve

Health Care: Obstetrics

There is no more scary risk in health care than obstetrics.Obstetrics is the chief concern of both hospital and physicianunderwriters due to the potential for large awards…

David Reynolds

Power: Blackout Britain

As aging power plants are closed, the margin of generatingcapacity in the UK over demand, which used to be over 30 percentbefore the industry was privatized in the early 1990s, could fallto as little as 5 percent by 2018. As a rule of thumb, 20 percentis generally considered to be an appropriate margin. The investmentrequired to replace this lost capacity with new plants,mainly nuclear and renewables, is thought to be around£200bn, but with no end in sight for the current economicwoes, will banks and other investors be ready or able to stump upsuch a huge amount…?

Anthony Wagar

Environmental Liability: The Unknown

It's not the environmental issues that are "known" that keep usup at night…it's the ones we don't know about that scare us most.The majority of our clients tell us that they are most concernedabout the unknown or unexpected environmental issues that have yetto rear their ugly heads…

Chris Burns

Employee Benefits: Exploding Health CareCosts

As governments around the world continue to struggle withbalancing their budgets, benefits under public health programs arebeing scaled back and the costs increasingly shifted to employersand individuals in the private sector. As a result,employer-sponsored health programs are growing rapidly andincreasingly becoming the most utilized and valued benefit programoffered to employees. The financial impact of this trendis becoming significant and quickly gaining the notice of CEOs andCFOs who continue to hold down operating costs as they look at anexpected slow-growth global economy over the next severalyears. The rise of health care costs on a global basis isso dramatic that it is becoming one of the biggest financialchallenges for multinational companies andorganizations. …At present trends, health care costsaround the world could double in just over 7 years. Talk about hardmarkets!

Andrew van den Born

Trade Credit: Price Hikes

With the West facing the prospect of a double-dip recession,growth will depend to a large extent on the ability of banks tolend. In its current guise, the new Basel Accord will greatlyimpact banks' funding costs, hiking up the cost of tradecredit and undermining cross-border business—potentially resultingin a new liquidity crisis. The score is currently: BaselIII; Exporters Nil…

Bob Peilow

Middle East: A Crude Awakening

One of the surest truisms well known to those who work in orwith the Middle East is that nothing really is as it appears. Wehave lived through 2011 with the promise of an Arab Spring only tobe disappointed by dictators who refuse to leave their lucrativeposts…. While we, in the West, continue to try and imposeour version of democracy on these various states, the deep-runningregional fault lines still present a significant threat to the oiland gas reserves upon which we depend…

Tim Mathieson

China: Pandemic Pandemonium

A recent issue of New Scientist magazine informs usthat the H5N1 avian flu virus is now just five mutations away frombeing capable of human-to-human transmission. …Being a particularlyunpleasant virus with a 60 percent human mortality rate, the risksto a country like China are severe, with densely populatedmetropolises such as Guangzhou and Shanghai and a relatively youngpopulation towards whom the virus is most deadly. The world hasbeen lucky so far that H5N1 has not evolved. Will our luckhold?

Alistair Lester

Global: The Death of Innovation

The scariest thing facing our industry is…ourselves! Insuranceis too often criticized, many would say fairly, for failing totruly innovate. The world changes every day and no more so than inthe last decade, yet the insurance industry barely reacts orchanges at all. Collectively we must learn to both demonstrate thereal value of what our industry does, but more importantly developinnovative solutions that meet the rapidly evolving needs of ourcustomers…

Francis Kean

D&O: Insolvency

What should be keeping board members awake at the moment is thefear of finding themselves suddenly shorn of the protection usuallyafforded to them by the corporateveil. Insolvency is a game changer even in abenign liability regime like the UK's. According tothe Insolvency Service, in the 12 months ending Q2 2011,approximately 1 in every 139 companies went into liquidation. Whena company becomes insolvent, control shifts through the liquidatorto the creditors, but the scariest part is that the legal fictionof the company continues to exist after corporate "death" and isstill quite capable of suing the directors thus overcoming all theusual defenses such of duty of care etc…

Michael Buckle

Renewables: New Frontiers

Renewable entrepreneurs are fearless and passionate about theirprojects but we have a "scary" register of risks that occasionallygets their knees knocking…

Tom Teixeira

Supply Chain: Mission-Critical Supplier GoingBust

Supply chain disruption is new Nightmare on Lime Street. Someex-colleagues of mine in the aerospace/defense and pharmaceuticalsectors still seem ignorant as to what this actually means and howit could affect them. Their order books are full, their productsare leaving their sites on time, to quality and within budget, andbuffer stocks seem to be in place. Then one day they hear about asmall supplier going bust. The usual reaction is "Oh, it's only asmall supplier, why should we be affected?" Well, it could justhappen that the supplier in question provided a unique component orproduct that was used right across their product portfolio…

Paul Search

Financial Services: Companies in the Dark AboutRisk

It can be said that insurance is "a solution trying to find aproblem." In the financial services industry there are many, manyproblems, of course, which continue to dominate newspaperheadlines. These problems are defined as "risks" in corporatespeak. What is frightening is the number of organizations thatstill do not have a clear understanding of which risks aremitigated through the insurance they already purchase…

Dominic Wheatley

Captive Insurance: Solvency II

Scary stuff this Solvency II! Especially if you've gota captive in the EU or trading into it. But hold on, let's not getcarried away. Our research shows that most EUcaptive strategies remain viable albeit in some cases with somere-engineering into cell structures and/or amendments to businessplans. Sure, required capital levels have increased, but in manycases captives already have sufficient resources to meet this. Thespectres of increased risk management and governance requirementsfor EU captives are, with good management support, thoroughlymanageable and in many cases do not go significantly beyondexisting best practice…

Brian Ruane

Real Estate: Weapons of Mass Disruption

Real Estate owners come to us to help them mitigate bothrecurring and new nightmares. For those of us interested in riskidentification, quantification, and mitigation, these nightmaresinclude age-old issues related to mass torts, pandemics,environmental catastrophes, natural catastrophes and man-madeissues such as employee dishonesty and other criminal acts. Newnightmares have emerged in the recent past which could includeweapons of mass destruction, such as global terrorism, and the useof weapons of mass disruption including issues relating to cyberrisk…

Steve Doyle

Aerospace: Fuel Price

The trouble with a Halloween blog about air transport is that itisn't or shouldn't be scary. It is statistically one of the safestthings you can do. The industry continues, despite all the recenteconomic challenges, to maintain and improve its safetystandards. New technology, mergers in mature markets and growth inemerging economies are only enhancing the risk profile of theindustry. Sure the industry has its own set of horrors, not leastthe fuel price, but the flying is not scary at all…

Conclusion

Luckily it's not all doom and gloom this Halloween—insurancesolutions exist. But is the scariest risk for your business? Takethe poll at the bottom of the page here and see…