Tag Archives: real estate

retirement

75% of People Not on Track for Retirement

A new study shows that three in four Canadians are not on track for retirement. With the recent economic turmoil, many working Canadians are struggling to make ends meet as it is. The same survey indicated that half the population is living paycheck to paycheck, and very few have any emergency savings built up. Living in the moment means that they’re not focused on retirement goals, and many expect to be working several more years as a result.

Although workplace pensions, the Guaranteed Income Supplement (GIS), Old Age Security (OAS) and the Canada Pension Plan (CPP) can provide funds, it’s often not enough. Moreover, the higher your income is now, the less likely you are to have your future needs met by these types of programs. If you’re among the 75% who are not on track to retire, here are the changes you need to make now:

Take a Hard Look at the Money Coming In

You’ll need to set a budget, but long before you get to it you must have a full accounting of how much money is coming into the household. Then, you’ll need to deduct between 20% and 30% of the gross for emergency expenses and retirement. Focus on building emergency savings that will cover you for three to six months first.

Eliminate Bad Debts

Carrying a balance for a mortgage or vehicle isn’t usually a problem, but more and more Canadians are maxing out credit cards and racking up other smaller debts. These things should also be knocked out of the way first.

Say Goodbye to Luxury Spending

While the older population is much better at assessing value and affordability, the younger generation is geared toward luxury items. Expensive cars, lavish clothing and trending technology add to debt. If you aren’t on track for retirement, and you’re carrying unnecessary debts, you should get yourself back on track and only purchase essential and value-oriented products.

Reevaluate Your Investment Choices

Unfortunately, many investment firms take a chunk of payments, and they fail to deliver in returns. Do a cost-benefit analysis and see if you need to consider moving your money to another firm or program. Diversification, both on a local and international level, is essential, as it provides a kind of insurance in case the economy falters. Think beyond stocks, as well. Bonds, commodities and real estate holdings can provide extra layers of security.

Use a Budgeting Program

There are numerous options available, but they all serve the same essential function. Using software or an app to track expenses takes the brainwork out of it and enables you to stick to your budget without having to work so hard.

Incrementally Increase Retirement Savings

As you pay off your debts and eliminate your mortgage, and your children become self-sufficient, you’ll obviously have more money to spend on yourself. Many people jump into doing the things they’ve been holding off on, like vacations and home remodels, but this becomes a slippery slope. As you find yourself free of expenses and debts, it’s imperative to increase your retirement savings, as well. During your last decade or two of work, your goal should be buildings toward setting aside 60% of your income for retirement. Some of the cash should go into savings, but a fair amount should be invested into dividend-paying stocks, which will add a steady trickle of supplemental cash as your non-working days progress.

Reevaluate Your Goals and Get Expert Advice

Even though most people can benefit from visiting with a financial planner, very few people do. You don’t have to be wealthy to benefit from one, either. A financial planner can help you figure out ways to minimize debts and how to save and may be able to help you get lower interest rates on the debts you already carry. If you choose not to visit a financial planner, you should still reevaluate your budget and strategy on a regular basis. This way, you can find ways to increase your savings if you aren’t setting aside enough, or enjoy more of your income now, provided you’re on track for retirement.

There was a time when a person could outright retire at a certain age, but it’s not like that any more. Today’s workers have to contribute more on their own to be able to maintain the same standard of living, and they have to work longer to be prepared. It’s still possible to retire at about the age your parents and grandparents did, but it requires more planning on your part.

tech

Where Are the InsurTech Start-Ups?

As a technology investor, I spend my days scouring Europe in search of the next big thing.

London’s FinTech scene has been a profitable hunting ground of late. With the U.K. FinTech industry generating $20 billion in revenue annually, it is not surprising that $5.4 billion has been invested in British FinTech companies since 2010.

A daily journey on the Tube is a testament to how rich the FinTech scene has become, with the capital’s underground trains now wallpapered with ads for Crowdcube, Transferwise, Nutmeg and other innovative companies. And London has played host to FinTech Week, celebrating the contribution these firms are making to the capital’s evolving financial services industry.

But where are the insurance tech entrepreneurs?

It is frequently—and accurately—argued that it is London’s birthright to play host to the poster-children of FinTech because of the capital’s impressive legacy and world-leading position in banking.

Read more: London FinTech investment in 2015 has already surpassed last year’s total.

The same can be said of insurance: The concept of modern insurance was solidified in Edward Lloyd’s coffee house in the 1680s. Yet there isn’t a day celebrating InsurTech— let alone a week of conferences, events and after-parties.

This is even though the insurance industry, with trillions of dollars of annual insurance premiums globally, is comparable in size to the rest of the financial services industry put together. Digital insurance should be an obvious target for technological disruption, especially as traditional insurers have struggled to adapt to the digital age en masse.

Recent research by Morgan Stanley found that consumer satisfaction with online experiences in the insurance industry is well below average, with only real estate and telcos finishing lower in the 16-industry league table. The big insurance brands have very little contact with their end consumer because of intermediaries such as offline broker networks, and, as a result, brand advocacy is often low. Put it this way: When was the last time you raved to your neighbor about your insurance provider?

Technology has the potential to drive worthwhile change in insurance. There are already a few success stories, but only a few. Insurance comparison engines such as Moneysupermarket, Compare the Market and Check24 have fundamentally altered how consumers discover their insurance providers. Black Box Insurance, based on telematics data, has become a mainstream product for young drivers, fueling the growth of companies such as InsureTheBox and Marmalade.

Read more:  These are the most influential people in FinTech

These are all fantastic firms, but there is not a long list beyond these examples.

So, why don’t we see more of this type of innovation? Insurance does have far higher barriers to entry than many other industries. To simply get an insurance company off the ground, it requires a colossal amount of cash to cover any potential claims. Additionally, regulation is tough, with good reason. The European Commission’s Solvency II Directive sets a high standard for the capital requirements for insurers to hit to be classed as an eligible provider.

This type of money is hard for a start-up to find. Having said this, very similar challenges are being overcome in retail banking, with challenger banks such as Metro and Atom obtaining banking licenses and putting regulatory capital in place. The successes that many have encountered in FinTech should buoy potential InsurTech entrepreneurs, as should the appetite of venture capitalists to invest in the insurance sector.

I don’t just speak for myself; insurance has excited many colleagues from other funds, especially as the industry is starting to give us some success stories. Slowly but surely, companies such as The Floow, BoughtByMany and QuanTemplate are demonstrating that technology can disrupt the insurance industry. London’s centuries-old legacy in insurance has created a talent pool that is, arguably, the best in the world. Combine this with the strong tech talent in the capital and you can see that the raw ingredients required to build extremely interesting companies are readily available. Additionally, certain large incumbent insurers are beginning to show interest in nurturing the capital’s potential InsurTech community. AXA is a particularly good example, having recently launched Kamet, a €100 million accelerator program aimed specifically at InsurTech entrepreneurs.

The combination of VC appetite, available talent and support from existing players demonstrates that London is a powder keg of untapped potential. The only missing ingredients, at the moment, are the world-beating entrepreneurs willing to put their ideas to the test.

FinTech has shown that London can lead the world in industries that are steeped in tradition and ripe for change. It’s time for InsurTech to step out of the wings.

No, Insurance Will Not Be Disrupted

I recently had the pleasure of attending the Insurance Disrupted conference in Palo Alto (put on by the Silicon Valley Innovation Center in partnership with Insurance Thought Leadership). This was the single best insurance conference I have ever attended. I was surrounded by hundreds of hopeful, smart, problem-solving professionals from disparate backgrounds and industries all trying to make a difference in insurance without money being the prime motivator.

I was so encouraged by what transpired at the conference, the connections that I made and what I believe would be the promise of a new future that I began to pen this article on my flight home. But something just did not sit right with me as I wrote. Three weeks have gone by, and I am beginning to understand why I felt the way I did; at the end of the day, insurance will NOT be disrupted.

For all the promise of big data, the Internet of Things, autonomous vehicles and peer-to-peer insurance, there was nothing presented at this conference that struck me as disruptive in the way the tech industry is generally thinking of the term today. When technologists think of disruption, they immediately point to Uber and Airbnb, which disrupted the taxi/livery and travel accommodations industries. The taxi industry is literally fighting for its survival. No, that will not be the fate of insurance. Insurance will be a lot more difficult to shake up or disrupt.

Here’s why:

  1. At the core, insurance customers are leasing the potential to access capital. That capital is sitting in predominantly liquid assets. Not real estate, not taxi medallions. How do you make a big pile of money irrelevant?
  2. The modern form of the industry is 300 years old, and the math is pretty solid (that’s why they call it actuarial science). We sell a product whose costs are unknown at the time of purchase. That means scale and immense capital is required to cover worst-case scenarios, which rules out any new business model not having that potential. Peer-to-peer providers just won’t be able to get sufficient scale to efficiently use capital to cover risk. And if they aggressively get scale, then they just become another insurance company, so what’s the point?
  3. Getting a better glimpse into those unknown expenses can create massive competitive advantages. This is where big data and the IoT creators are looking to disrupt, as big data and IoT will generate incredibly large data sets to be used to accurately predict, avoid and mitigate future losses. I have no doubt that these new technologies will make an impact on the industry, but I am less convinced of their disruptive nature. Insurers have already established non-actuarial, big data departments where fraud detections and credit scoring are just a couple of many predictive models being created. IoT devices will slowly be adopted by most insurers as they look to get competitive edges, but the follow-the-leader paradigm of the industry will mean that any edge will disappear quickly, and we will all be running hard just to stay in place. These technologies are impressive. I would classify them as a solid innovations to the industry, but not disruptive. (Disclaimer: I bought a smart battery from Roost.)
  4. Autonomous vehicles represent the one area where some chaos can occur. But notice I use the word “chaos” and not “disruption.” If autonomous vehicles can live up to expectations, then they will be a great service to society, reducing deaths and increasing efficiency. Risk will transfer from a personal lines business to commercial lines, and that could be chaotic for heavy personal lines auto writers such as State Farm and Progressive. But will this be disruptive? Will State Farm or Progressive be fighting for their survival the way that medallion owners in the New York City taxi system are? Again, I doubt it. State Farm is sitting on about $70 billion in surplus capital, and it generally writes at a 100 combined ratio, working the float and cash flow model. I think State Farm and large auto insurers like them will be just fine, and technologies such as autonomous vehicles will be more of an annoyance than an existential threat. And like others, I don’t think autonomous cars are nearly as ready to take over our roads as many seem to think.
  5. For better or worse, state-by-state regulation of insurance is intense and nebulous. Ask Zenefits. The battlefield is already uncertain, and scrutiny by a regulator with political ambitions can kill your disruptive product quickly. Any technology that you think you can create that could potentially benefit the majority of buyers while subsequently raising the price for some other group, alone, would be grounds for a regulator to squash you, as that vocal minority raises their collective voices. In Florida, the state may even create a company to compete against you, writing business at a loss. Insurance regulation might be the ultimate disruption killer.
  6. There was not one presentation on natural catastrophes, which happen to be my area of expertise. How we underwrite, manage and think about natural catastrophe risk has changed quite a bit over the past 20 years. In fact, CAT models have been and may continue to be the most disruptive force in insurance, and yet there is little technology can do to disrupt that area of the industry. I would have been very excited if we had discussions about new business models to help customers with the problems the industry is currently facing with getting adequate flood or earthquake cover to homeowners. If someone had proposed a new product that removed the exclusions of flood and earthquake from the homeowners policy, now, THAT would be disruptive! Alas, nothing on NatCat, and so we will continue to have thousands of homeless families following big storms and earthquakes.

I don’t think insurance will be disrupted, not in the way folks from Silicon Valley are used to doing it. But the future of insurance will look very different than today. Very digital. Streamlined. Less clunky, more efficient. If “disruption” comes to insurance, it is likely going to require the replacement of the current set of leaders with new ones cultured in this digital age and influenced by the successes of technology to make change happen to their business models.

Paul Vandermarck from RMS (a CAT modeling vendor) perhaps summed it up best when he said that no matter how all of this change to the industry plays out, we know of one sure winner: the customer. And that’s how it should be.

What to Expect on Management Liability

Gradually, over the last four-plus years, several management liability insurance (MLI) carriers have shifted their underwriting appetite and guidelines nationally, most dramatically in California. These changes have included some combination of:

·         Increased rates
·         Increased retentions
·         Reductions in coverage
·         Reductions in total limits offered
·         Reductions or removal of wage and hour defense cost sub-limits
·         Non-renewal of insureds based on industry, asset size, financial condition or loss experience.

This is quite a change, as for the previous 10-plus years there has been a surplus of capacity and MLI carriers were eager to write accounts at very attractive rates and terms. While there are still numerous MLI carriers with significant capacity, including some new entrants, the marketplace appears to be reaching a point where this capacity will no longer be use to offer the terms and pricing that we had been accustomed to seeing. This raises the question, “Why?”

Based on our conversations with MLI carriers in this niche, here are a few of the reasons:

·         Poor economic conditions five to seven years, ago leading to a significant spike in the frequency of employment practices liability (EPL) and directors and officers (D&O) related claims

·         Dramatically rising EPL claims expenses (even if a claim is without merit — remember, these policies cover defense costs)

·         Significant and continual increase in the filing of wage and hour claims (wage and hour suits are up 4.7% in the last year and 437% in the last decade)

·         Uptick in D&O claims involving bankruptcy-related allegations, breach of contract, intellectual property, federal agency investigations and judgments, family claims  and restraint of trade

·         The duty-to-defend nature of the policies, forcing carriers to provide a wide expanse of defense coverage for what might be arguably uncovered claims or insureds

What can our current (and new) non-profit and privately held management liability insureds expect as a result of the changes in the marketplace?

Our recommendation is to set expectations as follows:

·         There will be increases in retentions and premiums.

·         Smaller clients will need to absorb bigger percentage increases in premium and retention (as well as possible reductions in coverages), although in many situations the incumbent carrier will still be the best option if the increases are not outrageous.

·         A reasonable degree of competition and capacity will still be available for the larger management liability client. This may help mitigate increases in premium and retention.

·         Increases will be felt by insureds located in major cities (carriers generally still like risks in smaller cities and outside of states such as California, Florida, Illinois, New York and New Jersey).

·         Coverage for the defense of wage and hour claims will be more difficult to obtain and, when available, likely more expensive to purchase and with possibly lower limits or higher retentions.

·         Non-renewals by some carriers, based primarily on class of business or location. Some of these classes of business include:

o    Real estate

o    Healthcare

o    Restaurant/retail

o    Social media

o    Pharmaceuticals

o    Tech/start-ups

·         Carriers are asking for much more underwriting information than they have previously, especially if the insured has challenging financials, the insured is seeking additional funding or the insured has a challenging loss history.

Since 2010, Socius has been advising our clients that the MLI market appeared to be trending toward a hardening, following on the heels of numerous years of softness. As we get deeper into 2015, we continue to believe that this is the case.  The gradual transition that we initially described has, in fact, taken firm hold. We hesitate to pronounce the market as officially “hard” only because we hear rumblings that suggest that market conditions could very well deteriorate further, making what we consider hard today even harder.

For the moment, the watchword to agents and brokers is: “Manage expectations!  Difficult news is coming, so let clients know early – and often.”

What Risks Will Emerge in 2015?

Our list of emerging risks for 2015 covers the kind of perils that keep risk managers up at night: cyber risk, oil price volatility, the changing demands of today’s workforce, the over-confidence corporations have in the ability of their entity to withstand a negative event and more. It’s a long, eye-opening – but certainly not all-encompassing – list. [To read the full article from which this post is taken, visit WillisWire.]

While it is a bit axiomatic to say, it doesn’t make it less true: The world is becoming increasingly complex and uncertain. As the Internet of Things continues to grow, we have access to more and more data on anything and everything. This is good news – more information tends to lead to greater understanding. However, in this age of information overload, it is important to make sure you are using the right data to answer the right questions. We believe the rise in analytic tools will make a significant difference in the way risks are understood, measured, mitigated and transferred.

Political: Oil Volatility

Sumit Mehra

The price of a barrel of oil has slipped by almost 40% in the last few months. Although this price reduction should contribute toward the growth of the world economy in the long run, it has a potential adverse and significant impact on oil-producing countries. These countries are now faced with the risk of either having their economies de-stabilized or run the risk of defaulting on their debts. As a consequence, some of the de-stabilized economies may begin witnessing a mix of risks.

Cyber: The Risk of the Cloud

Peter Armstrong

Cloud computing is rapidly becoming a key component of many organizations’ technology-enablement strategies as they continue to seek differentiation in competitive markets. Cloud, however, is a significant issue from a risk perspective, both in the context of governance and compliance. An example: geographic location of data – are you sure where personnel data is resident, and is that consistent with the jurisdiction of geographies where client organizations operate? Also, distributing data across many cloud service providers means that accidental aggregation that can compromise the re-aggregated credentials is a real issue. Cloud, therefore, constitutes an arena where we are only now coming alive to some of the dimensions of complexity with which we are going to have to wrestle in the coming 12 months.

Aviation: Drones

Steve DoyleSteve Doyle

With oil prices tumbling and margins expanding, the fuel-intense transportation industry is perhaps a little more relaxed about the risks it is facing. There is, however, a fast-growing aviation risk that could affect businesses across all sectors: drone usage. Unmanned aerial vehicles (UAVs), or drones, are now being used by utility, construction, leisure and media companies, to name but a few. Our lives would really change if our online orders were delivered to our drone landing pad! Regulation of the operation of these aircraft varies widely across the world, and, sadly, as a result of this and some ignorance, “near miss” stories are frequent. Drone technology is very familiar from military activity, but commercially it does have the power to change, save and protect lives. With these rewards come risks, and these need to be understood and managed if you have an eye in the sky!


Terrorism: Growth of Islamic Extremism

Terrorism blogger Tim HoltTim Holt

The risk I’m keeping an eye on this year is a development of one that is already extant: the further growth of Islamic extremist ideology and militant action globally. With the so-called Islamic State seeking to consolidate fundamentalist governance in Syria and Iraq and al Q’aeda and its affiliates seeking to expand further into South Asia, the risks to organizations and individuals from new recruits to and returnees from jihad will grow and mutate. This will include the cyber-sphere as a vehicle for the spread of the ideology that drives militant fundamentalism and as a means of attack. Fragile states will find difficulty in containing Islamic extremism while intelligence agencies will be challenged to detect small armed cells or individuals acting on their own initiative.

Financial Institutions: Technology Partners

 Financial Services blogger Richard Magrann-Wells

Richard Magrann-Wells

Banks jumping into bed with Apple and person-to-person lenders? Isn’t that fraternizing with the enemy? Maybe, maybe not. Financial institutions are smart to be pragmatic about how fast the world is changing and trying to find the right technology partners, but mistakes will be made. I have no doubt that there will be regrets by some institutions as they find their partners are not who they thought they were. Partners may become direct competitors or their partner’s technology may create weaknesses in the company’s online security. Or partners will be accused of bad behavior (think red-lining or insider trading), and suddenly your firm has serious regrets, and your reputation is damaged, as well.

ERM: Outsourcing

Dave IngramDave Ingram

Outsourcing might just be the most common business management earnings booster of the past 10 years – which means that it is also a top candidate for becoming a major emerging risk in the near future. There are two basic ways of controlling the risks of outsourcing – by specifying standards at the outset of the arrangement and by inspection of the process and output on a continuing basis. But with the explosion of outsourcing over the past 10 years, even firms that had set down extensive and clear standards at the time of the original agreement and that have allocated the needed resources for inspection of the processes and outputs are at risk from the complacency that comes from the passage of time without serious incident, the changing individuals on both sides of the agreement and the changing pressures on both organizations. An outsourced process is out of sight. If it also becomes out of mind, then it will likely move out of the emerging risk category into the current problem category.

Analytics: Balance Sheet Overconfidence

WillisWire analytics blogger Phil EllisPhil Ellis

An emerging risk I’d like to mention is the overconfidence corporations have in the ability of their balance sheets to withstand a severe reversal of fortune. Many if not most of the world’s largest companies are looking for ways to retain more risk and in the process to reduce their insurance expenditures. One of the reasons mentioned is that many insurers have lower credit ratings than the corporation itself; so why would a company entrust its financial health to weaker institutions? This argument makes sense in an average year, or indeed in most years. However, when a crisis strikes a company, its strong credit rating is a mirage, and insurance coverage becomes very welcome. Approaching the issue of optimizing insurance as a hedge to protect corporate financial objectives is therefore a critical need for most large corporations. When looked at this way, insurance takes on its rightful role as a way to reduce volatility of financial results.

Environment: Extreme Weather Related Risk

Anthony WagarAnthony Wagar

Weather-related environmental risk and natural hazards and disasters continue to make the Top 10 list for many risk managers and insurance professionals across the globe. Why? Because we learned some very unfortunate lessons over the years, thanks to the likes of super storm “Katrina,” “Sandy” and other natural catastrophes in terms of the unexpected frequency and severity of pollution losses because of excessive rain, storm surges and overall damage caused by water (e.g., pollution release from floating drums of chemicals, cross-contamination of neighboring properties from historic/pre-existing contamination, sewer authority system back-ups, landfill containment breaches, mold growth, etc.). Many businesses were hurt financially via legal liability, penalties, government regulations, financial disclosure requirements or simply public relations problems surrounding responsible corporate citizenship. If there are any golden rays of sunshine forecast to break through the dark clouds up ahead, then it would be the increased level of awareness by the risk management community and the acknowledgment of the need for adaptation and proper planning. Some can be in the form of reducing overall carbon footprint and greenhouse gas emissions and others via amendments to site improvement or development plans that incorporate better surface water management systems. We’ve blogged about this risk in the past (here and here), and it’s important to address this business risk now as the underwriting community will continue to modify the risk appetite and terms and conditions for certain classes of risk.

D&O: Certification Requirements

Directors and Officers blogger Francis KeanFrancis Kean

Directors have rightly been concerned for some time about the uptick of claims activity and the focus on individual personal liability. Less attention has been paid to the tactic now deployed increasingly by regulators to tilt the evidential burden in their favor when a claim is brought. The single most-favored method of achieving this is “certification”: i.e. the process whereby regulators insist as part of a senior manager’s duties that she certify that everything in her particular part of the garden is rosy. Then, when a storm comes along – perhaps several years later – the certificate is taken out of the filing tray, dusted down and relied on as evidence of neglect in having “allowed” the problem to have arisen. Whether these “early trigger” exposures are adequately addressed in conventional claims made policies is open to question.


Executive Risk: Derivatives
WillisWire financial instsitutions blogger Andy Doherty

Andy Doherty

Warren Buffett famously said in his 2002 annual report to shareholders, “In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” In the world of D&O insurance, “derivative” refers to a specific type of lawsuit that is brought by a shareholder on behalf of a company against a third party – usually the D&Os of that company. In a nutshell, the allegations are that the D&Os mismanagement harmed the company. While not a new exposure, it sure seems to have increased. The unofficial top three derivative litigation settlements (not including judgments) that have the largest cash component have now occurred in the last 24 months, with each well over $100 million. And those cash component settlements would most likely have to be funded by the personal assets of the individual D&Os…or, and, more likely, the oft-discussed Side A portion of a D&O insurance program. But what could a board of directors allegedly mismanage?

  • M&A transactions
  • Cyber-security issues
  • Compliance issues (think costly FCPA or other regulatory (civil or criminal) investigations)
  • Environmental issues
  • Whistleblower issues
  • Questionable executive compensation programs

The list goes on!

Asset Management: Demand for Transparency

Mary O'ConnorMary O’Connor

A key emerging risk in the asset manager space is fees, transparency and conflicts of interest.  As the number of retirees increases, there will be increasing pressure on asset and wealth managers and annuity and pension providers to demonstrate value for money and to maximize the size of retirees’ pension pots. Regulators, in particular, will be under political pressure to look closely at this sector. Asset managers should act now to ensure that they understand their obligations to all stakeholders and to ensure that they have achieved a sufficient level of disclosure and transparency.


Real Estate: Cyber Risk of Tenant Data

WillisWire real estate blogger Brian RuaneBrian Ruane

Real estate is a brick and mortar (OK, glass and steel) industry that would seem to be immune from cyber crime. But owners, particularly residential owners, are increasingly interacting with tenants online, which may include payment of rent. If owners are taking online payment (or if they’re just keeping online records), they are going to be collecting potentially sensitive information. While the tenant portals that the owners maintain are likely to use up-to-date security measures, we’re learning that there may be no place in the cyber realm that is completely safe. A large residential REIT just sustained a data breach of tenant information when someone hacked into its tenant portal. This is probably the leading emerging risk for the real estate sector.


Benefits: The Changing Face of Human Capital
WillisWire employee benefits blogger Lester Morales

Lester Morales

The Millennial generation is at your door with fresh ideas about making work (and life) meaningful. It’s time to stop just strategizing on how to manage Millennials – and time to start truly retooling your human capital strategies to succeed and grow with a workforce that will be driven by their generation. From the C-suite, human resources and every management level on down, reviewing your organization’s value proposition and its ability to attract, retain, motivate and engage employees should be your highest priority heading into 2015. (Because you’d better believe, Millennials absolutely require engagement.) I’ll be going into this in more detail in my Thursday post, The Changing Face of Human Capital in 2015.


Brazil: Corruption
WillisWire Brazilian Corporate Risks DirectorAlvaro Igrejas

Alvaro Igrejas

Brazil is at a delicate time. The news of corruption cases is growing, and it creates consequences in some types of insurance. The search for protection by these executives is increasing the number of D&O claims. This situation also affect the works and construction sector, because many engineering companies are under investigation; construction and infrastructure suffer a delay in the works, which decreases the hiring of engineering insurance risk. Cash flow problems are also now faced by engineering firms because the irregularities found in their contracts are generating delays in payment of invoices. This makes the public and private works – even those that are not under investigation – have trouble in meeting their schedules, which certainly result in an increase in guarantee insurance claims/sinister. Faced with this whole picture, and if the economy does not grow in 2015, other sectors will also be vulnerable, such as:

  • Transport insurance: because of the decline of the industry and trade
  • Automobile insurance: impact generated by the decrease in production and vehicle sales
  • Benefits insurance: reducing the number of employees as result of the fall in trade


Personal Risk: Device Ubiquity

WillisWire personal insurance blogger, Kevin O'BrienKevin O’Brien

One of the fastest-growing risks we face on a daily basis is being victimized by the accessibility and convenience offered through the growth of online devices. One of last year’s most alarming revelations was a Russian website broadcasting thousands of unsecured webcams from across the world, including several infants in cribs. More than likely, this is the first in what will be a growing trend as the number of Internet-connected devices grows into the Internet of Things (IoT). The more our devices are connected to the Internet, the greater the opportunities available to hackers for exploiting potential security lapses. Exploiting security flaws is especially easy when one installs a new device but does not change any of the default settings. Fortunately, taking an active role in your home’s Internet security can mitigate most of the potential for risk. As the British Information Commissioner’s Office pointed out,

The danger of using weak passwords has been exposed… after a new website was launched that allows people to watch live footage from…insecure (Internet connected) cameras across the world. The website, which is based in Russia, accesses the information by using the default login credentials, which are freely available online, for thousands of cameras.

This type of revelation should immediately make everyone take a few moments to examine the settings on all their devices and the quality of all passwords used in home Internet security.


Global: A Risk Is a Risk Is a Risk

WillisWire global risks blogger, Geoff TaylorGeoff Taylor

As I have maintained for some time, “emerging risk” is a somewhat misused term.  It has been used in the insurance industry to mean new risks that were not or are not currently insurable in any meaningful way; i.e., the market is not sufficiently developed by way of capacity, geographical spread or the number of capital providers. In fact, I believe risks are the same as they ever were; it’s just which ones come to prominence. What drives this may not be the apparent real threat but more a perceived threat, which, fueled by media, can become the risk of the moment. Think H1N1, Ebola, terrorism, gun control, data privacy, etc. The real measure of a risk is still severity and likelihood, and these are not constant; they are continually moving.  It is therefore really important to stay focused on which risks are the real threats to achieving the enterprise objectives and manage these as a priority. Of course, some of the issues I mention may be more or less significant depending on your sector and location. My consistent message is that risk managers should maintain the position of the voice of reason in their organizations so that resources do not get diverted away from managing, reducing and controlling the risks that will have the most impact on the organization into the latest ’emerging’ risk.