As we near October 31, Halloween festivities are in full swing.Haunted houses, terrifying costumes, and scary movies are all partof the frightful frivolity that takes place this time of year.

Although Halloween allows us to find delight in being fearful,this is not the case in the insurance industry. Scary risks are nolaughing matter, as they can result in serious consequences thatimpact a client or an industry.

Willis' blog site, WillisWire, compiled a list of the scariest risksfaced by different areas of the industry this year.

Click through the following slides to see some of the mostterrifying cases of 2013.

Francis Kean

D&O – Reservation of Rights Leaving YouExposed

Imagine you have just been shipwrecked. You spot twolifeboats. One is virtually empty and seems completely sea worthy.The other is overcrowded, listing badly and taking on water. Youmake it across to the first one and are just about to climb onboard when a man leans over the side and says you're not allowed onboard and that you'll have to swim for the other one. That's whatit might feel like in a large Directors & Officers claim whenyou realize that insurers' reservation of rights with respect tocoverage apply to you as an innocent director as much as to yourcolleagues accused of fraud or dishonesty.

David Shuey

Life Science – Hidden Risks of OutsourcingR&D

The life science industry has evolved away from centralizedresearch, development, and commercialization. Now, many companieslook like Frankenstein's monster with many critical businessoperations bolted on via outsourcing contracts. To makematters worse, many of these activities are performed by foreignentities. The complex supply chain that results hides many riskhobgoblins. Like ghosts, many of these risks are invisible untilone of them decides to manifest with disastrous results.

Paul Greve

Health Care – Jumbo Malpractice Verdicts

The scariest risk in health care in 2013 is the potential for ajumbo medical malpractice verdict ($50 million or more). Inmany of these jumbo verdicts the patient suffered profoundneurological impairment requiring a lifetime of expensive care.Many of the cases arose in the obstetrical setting, especially theclassic claim of failure to diagnose and/or timely respond to fetaldistress during labor. However, there are also cases involvingnursing home patients, which exceed $100 million. They arereason to bear in mind the old adage: “An ounce of prevention isworth a pound of cure.”

Richard Magrann-Wells

Financial Institutions – Runaway ComputerTrading

This year financial institutions learned in a most visceral waythat the markets have the potential to destroy an institution withblinding speed. With the introduction of algorithmic tradingand other computer-executed transactions, it is becoming moredifficult for humans to act as “circuit-breakers” when the programsgo awry. The only viable solution is ironclad controls thatmandate systems with adequate procedures in place to deal with anypossible errors. Remember it's not actually the speed that's theproblem—it's hitting the wall that hurts.

Kevin Wilkes

Security – The Relentless Wave of Violence

From a small classroom in Sandy Hook to a shopping mall inKenya, from the athletes of the Boston Marathon to the workers ofthe D.C. Navy Yard, one thing remains clear: Today, perhaps morethan ever before, risk leaders must take steps to prepare for theworst. Domestically or internationally, those who fail to takesteps now to mitigate its crushing effects could find themselves ortheir organizations overwhelmed and lost in the wake of itsdestruction. Instead, transform this wave of senseless loss into awave of action, an opportunity to address or re-address issues ofworkplace violence, campus violence, facility protection, andcrisis management planning.

Sharon Kimmel

Personal Insurance – Being Caught Without a DisasterPlan

“Everyone has a plan 'til they get punched in the mouth.” ~MikeTyson

Lots of Americans got punched this year, with wildfire inYosemite, flooding in Colorado, tornadoes in Oklahoma, Missouri,Mississippi, a fertilizer plant explosion in Texas andrecord-breaking snow in the Mid-West and New England. Natural andnot-so-natural disasters are rare for most of us, but they arefrightening for all of us. Surviving them can depend on having aplan in place.

Julien Combeau

Environment – M&A “Clean Exits” GettingDirty

When it comes to environmental liabilities, the cleanest exit onpaper can get dirty if historic pollution happens to be found bythe buyer or the neighbors of the property after the sale. Due tothe “polluter pays” principle applicable in many jurisdictions orthe burden of maintaining an escrow large enough for a long time, aseller can be caught up and need to financially “re-enter” in asettlement. Hopefully, they can turn to environmental insurance tohelp their exits to stay “clean” in the long run.

Robin Somerville

Energy – Arctic Disaster

Relatively high oil prices, together with advances intechnology, have meant that hitherto unattainable hydrocarbonsunder the Arctic ice shelf are now able to be extracted andproduced profitably. However, the shadow of Macondo continues tohaunt the exploration and production industry, as a major pollutionincident in the Arctic on the scale of that disaster could prove tobe catastrophic for all concerned—not only would the cost ofclean-up be exorbitant, but the political ramifications could wellmean a total suspension of Arctic E&P activity.

Ann Longmore

Executive Risk – The Wrath of theWhistleblower

In today's age of the whistleblower—with state, local, andpossible federal protection, including Sarbanes-Oxley andDodd-Frank—the global challenge is to treat seriously each andevery report of possible organizational misconduct rather thanfocus on a witch hunt into the possible motivation of the tipster.Failing to do so (perhaps the one time that the blindsquirrel finds the nut), may have serious implications fororganizations and executives. The least of which could includefines, penalties; the most serious of which could be the loss ofreputation.

Tim Mathieson

China – Tainted Food Supply

Although their cuisine is amongst the tastiest in the world,China's residents are increasingly scared about what is reallygoing into their food. In 2008, melamine-tainted milk powdersickened hundreds of thousands of babies and killed six. We'vealso had recycled “gutter” oil, cadmium-tainted rice,hormone-overdosed “instant” chickens, rat-dressed-up-as-lamb andexploding watermelons (hormones again). The list isstomach-churningly long and includes some foreign brand names aswell.

Steve Leggett

Fidelity – Disabled Safeguards

A company was doing work on its computer system (timed so thatcertain functionality was affected only in the wee hours of thenight). They happened to be a financial institution and theiremployees could trade on their own margin accounts up to a maximumlimit of a not-very-scary $10,000. It just so happened that whilethe upgrade was being made to the firm's system, and certaincontrols were disabled, an employee trading on his personal accountfrom his home computer realized that he could make trades far inexcess of $10,000. By morning, this enterprising individualbelieved that he had amassed a nine-figure profit. Instead, whenthe markets opened, the night owl had “earned” his company lossesin excess of $100M.

Ann Longmore

Cyber – Individual Suckers; CorporateLosses

At Halloween, some of us dress up as spider man, or pirates, orprincesses—but the “Nigerian princes” are out there every daytrying to lure the unwary into wiring them money, and it is notonly individuals who fall prey to these scams. In at least oneinstance, the firm was the victim of a phishing scam in whichhackers gained access to the firm's computers…Wire fund transferfraud is pretty scary stuff—easy to do and scary across allindustries.

Fiona Shaw

Industry & Agriculture – Water Scarcity

One seriously scary risk is the risk of interruption, fromwhatever cause, to our ability to access water. No longersolely a concern for the areas of the world where there is littlerainfall, water scarcity is a global concern affecting both ruraland urban communities, businesses and households….What if the tapwas turned off? Our access to water denied! This might be due tocontamination of drinking water on a national scale, a failure inthe supply infrastructure or a consequence of drought. Do youhave a survival plan?

Ann Longmore

Fiduciary – Suspicious Returns

Be afraid—be very afraid—of investments that promise highreturns with low risk…Several pension plans learned this the hardway after investing about $100 million in a fund promising steadyhigh returns with, you guessed it: low risk. To lure them to theirdoom, the fiduciaries had been promised (double pinky swear!) thatif the investments returned less than a set return, an unnamedfinancial backer would make up the difference. Instead of theguaranteed 12% return (spooky), the fund yielded sub-parreturns—and law suits on behalf of plan participants.

Anthony Wagar

Environment – Pollution Exclusions

Companies are scared to death that they could have a claimthat's not covered under their current insurance program. Environmental claims are no exception and are one of those hiddenrisks that always seem to be lurking in thedark. Unfortunately, risk managers can't look to theirstandard general liability and/or property policies to respond, asthe pollution exclusions function to provide very limited, if any,coverage for a variety pollution exposures and risks thatexist.

Dave Passman

Property – Perfect Storms

Last year, two days before Halloween, New York sustained afright night like no other in recent memory. Not only did stormsurge from “Superstorm Sandy” cause extensive damage to numerousbuildings housing many financial institutions along Water Street(appropriately named) and other buildings in the financial districtbut also caused extensive damage to New York's infrastructure(subways, tunnels, etc.) and power outages throughout lowerManhattan. Next time? Think about Hollywood disastermovie-type flooding in major oceanfront cities and urban areas,then add 120-mile-per-hour winds and you have the makings of acatastrophic event of the magnitude not previously considered.

Jim Blaney

Employee Benefits – The Self-Insured Scare

Under the Patient Protection and Affordable Care Act (“PPACA”),fully insured plans are subject to new taxes and mandates that willincrease the costs of coverage for employers. Therefore, manyemployers who never considered self-funded plans have begun toconsider them to avoid potential cost increases. In fact,carriers and other providers are introducing products with muchlower attachment points for the stop-loss (needed for allself-insured plans) than had traditionally been the case,permitting much smaller employers to consider self-funding theirplans. Several states have begun to take steps to regulatestop-loss coverage the same way they regulate fully insured plans.In addition, the Department of Labor has indicated it will nowexplore treating self-funded plans as insured plans, requiring thesame mandates and expenses that self-funding was intended to avoid.If this occurs, it could eliminate an arrow in the cost managementquiver for employers, and is a direct threat to employerflexibility and the protections that ERISA offers to employers whooffer medical plans to employers….

Wendy Peters

Terrorism – TRIA: Trick or treat on CapitolHill.

For most U.S. companies the continued availability of sufficientproperty and casualty terrorism insurance will become a significantissue in the coming months, with the reauthorization of theTerrorism Risk Insurance Program ReauthorizationAct of 2007 (formerly known as “TRIA”) in jeopardy. The Actsunsets December 31, 2014 and with TRIA not on the 2013 agenda, itis feared that a disinterested Congress will not take up the issueuntil late in 2014, causing major market disruption.