Loss reserves are arguably one of the most difficult risks to estimate and monitor. In fact, inadequate pricing and deficient loss reserves have been the leading cause of property/casualty company impairments. According to A.M. Best, from 1969 to 2009 they triggered approximately 40 percent of all impairments - four times more than those emanating from natural catastrophes (1). There are many uncertainties in managing long-tailed, heavily legislated lines of business that can be triggered from emerging risks. Unforeseen inflation and anticipated legislative changes over a 10 to 30 year period present many demands. In order to prepare for emerging risk scenarios, future trends and related uncertainties need to be explicitly identified, contemplated and estimated.
Posts Tagged ‘Guy Carp’
Technologies that we may take for granted today such as anti-lock braking and airbag systems, driving and parking assistance, hazardous condition traction control and global positioning system routing, may soon all come together and evolve into fully autonomous self-driving automobiles. Self-driving cars are expected to begin commercial production and be in use by 2017. Google, the pioneer in the field, claims it can cut road accidents by eliminating the human driver who gets distracted by text messages or becomes tired. Although safety and efficiency gains have been the most cited and prominent benefits for the rationale for the development of self-driving automobiles, a considerable number of challenges remain.
Growth projections for the drone or Unmanned Aerial Systems (UAS) sector are nothing short of phenomenal, as the opportunities and advantages afforded by using this type of machinery in construction, agriculture, energy/utilities, mining, real estate, news media, film production and public safety become increasingly more apparent each passing day. Nevertheless, the potential economic benefits are considered to be vast, expecting to generate an estimated economic benefit of USD82 billion along with 100,000 jobs by 2025 (1). This rapid increase in the number of drones is prompting concerns for:
- Heightened collision risk for commercial airplanes as reports of drones in close proximity continue to make the headlines in the United States and the United Kingdom
- Privacy concerns from remotely controlled autonomous UAS equipped with cameras
- Increased concern of drones being hacked or used as weapons by terrorists.
The Dawn of the Drones: The Evolving Opportunities and Risks of Unmanned Aerial Systems and Driverless Cars
The overall rise of connectivity to a growing number of physical objects will entail additional emerging risks to individuals and companies. Examples include:
- Unmanned Aerial Systems (UAS or drones)
- Driverless vehicles
- - Trains are already in use in London and New York
- - Self-driving cars may soon become more and more prevalent.
Many scientists view nanotechnology as the revolutionary technology of the 21st century. Just as plastics were a pervasive and revolutionary product of the 20th century, nanotechnology products are having widespread use and change our lives in a myriad of ways. This technology has quickly evolved into a global force that is transforming manufacturing, medicine and an ever increasing number of consumer/food goods. The field has become a worldwide market worth an estimated USD 1 trillion and is projected to grow at a rate of 16.5 percent through 2020 (1).
Risk is a major barrier to innovation. Taking a risk, however, is almost always the first step in any type of progress. The productivity of the global economy depends on companies that are willing to find new and better ways of doing things despite the potential perils involved. If they start to be ruled by fear of liability, our global development could be in jeopardy. By helping businesses manage the risks associated with product development, (re)insurers play an important role in stimulating innovation and helping our world move forward in positive ways. From the early days of marine exploration, to the first satellite launch, to the development of state-of-the-art technologies, (re)insurers have provided a critical safety net that has supported and encouraged the creative process. Given the continued transformative potential of emerging technologies such as nanotechnology, 3-D printing, aerial drones and self-driving automobiles, and their applications in virtually every industry, it is incumbent upon insurers and reinsurers to help accelerate the commercialization and benefits of these innovations to society. At the same time, it is critical to thoroughly understand and manage the risks.
Through the Affordable Care Act, many measures are being implemented that are expected to have a positive impact on bending the healthcare cost curve downward in the long term. However, the same act removed annual and lifetime limits for medical insurance claims. As a result, the maximum potential loss from a single individual is a new frontier of risk, with new heights being reached each year. This is both a frequency and severity issue.
The impact of rising healthcare expenses has been and will continue to be felt around the world, in developed and undeveloped nations alike. Rising healthcare costs are putting a strain on governments worldwide. Nowhere in the world, however, are expenses as high as they are in the United States, where the impact extends into the medical component of workers compensation costs. Although the rate of growth has seen some stability, it still outpaces the US growth rate of inflation. The figure below illustrates that per capita spending in the United States in 2010 was over USD 8,000. A key driver for higher US costs is that it spends more on hospital care and medical specialists. Hospital costs are 60 percent higher in the United States than in other Organization of Economic Cooperation and Development countries. Spending on the use of specialists is more than two times higher. Forecasters believe this trend will increase.
The impacts to society from changes in longevity and life expectancy will be wide-ranging and incredibly difficult issues to grapple with. A 2012 International Monetary Fund (IMF) study revealed that if individuals lived three years longer than expected the cost of aging could increase by 50 percent. This translates to 50 percent of 2010 gross domestic product (GDP) in advanced economies and 25 percent of 2010 GDP in emerging economies. Globally that amounts to tens of trillions of US dollars. The United Nations expects the aggregate expenses of the elderly will double over the period between 2010 and 2050. The figure below shows the projected trend of rising life expectancy to continue in all regions of the globe regardless of economic advancement.
In the last 150 years, dramatic improvements have been made in life expectancy. Some developments such as immunizations for smallpox, polio and measles created quantum improvements, while the proliferation of better lifestyles, clean water and more nutritious diets provided gradual and continuing change. While most historical life expectancy developments resulted from improvement in children’s mortality, in the 20th century, mortality rates declined significantly for older ages.