October 28th, 2009

Five Ways to Find and Manage Hidden Risks

Posted at 1:00 PM ET

metropoulos_emil_bioEmil Metropoulos, Senior Vice President

Some casualty risk accumulations stay hidden, but this doesn’t mean your exposure disappears. A single event could trigger a chain reaction of insured losses on professional and product liability covers, depleting your capital and possibly destroying shareholder value. In extreme cases, even solvency could be threatened. Using Guy Carpenter’s Casualty Cat model, developed jointly with Arium, Ltd., it’s possible to identify some of these “casualty catastrophe” risks early — before they drain your balance sheet.

1. Identify hidden accumulations: review your portfolio to find interrelated risks that could result from the same event. One event could strike several industries or jurisdictions at the same time, as risk is transmitted through normal business relationships such as partnerships, joint ventures and through the supply chain.

2. Figure out where the connections lead: the full impact of a casualty catastrophe may stretch to companies or industries that seem to have little to do with the original risk. Understand the breadth of your exposure.

3. Determine the drivers: inventory the scenarios that could trigger a casualty catastrophe, and model them with Casualty Cat.

4. Measure the effects: determine likely and worst case scenarios, particularly as they relate to your tolerance and appetite for risk and limits exposed.

5. Take informed action: adjust the risks in your portfolio, increase retentions, or purchase reinsurance. Take action knowing that it is based on a thorough analysis of the threats to your capital.

Click here to learn more about managing casualty catastrophe risk >>

Click here to download the Casualty Cat fact sheet >>

Click here to register for GC Capital Ideas e-mail updates >>

AddThis Feed Button
Bookmark and Share

Related Posts