Major correlated casualty events, like asbestos, tend to not repeat themselves in quite the same way. The casualty insurance industry and its insureds learn from such events. Some implement an avoidance strategy to mitigate the newly recognized risk in their portfolio. Others take advantage of the heightened risk perception to design new products and/or charge more premium.
However, new correlated risks, like subprime lending and climate change litigation, emerge regularly and new correlated events, which never exactly mirror past events, continue to impact the industry. As a result, the early identification and management of emerging risks is an important and growing focus of the casualty insurance industry. In the long run, the development of methods to effectively assess cost and ultimately manage emerging risks is critical to the stability and profitability of the industry. But if emerging risks never look the same, how do we know them when we see them? This session will discuss the following questions:
• How do we define emerging risks?
• What are some of the practices employed by the casualty insurance industry to identify and manage emerging risks?
• While the specific materials or practices that lead to correlated losses may not repeat, are there common patterns in emerging risks?
• What new methods, technologies, or insurance products are being developed to identify and manage emerging risks?
• How can the reinsurance industry play a role in managing emerging risks?