Best's Review


At Large
New Risk Reality

Insurers should be ready to fill the gaps in coverage.
  • Tony Kuczinski
  • December 2019
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The world is faced with a growing array of new risks from natural causes, such as floods and wildfires, to man-made threats like data breaches and autonomous vehicles. However, the biggest risk may be a low-to-nonexistent awareness of today's new risks among businesses and individuals. This has created a potential gap in protection or “insurance gap” that is important for the re/insurance industry, as well as society at large, to close.

Increasingly destructive natural catastrophes, such as hurricanes, earthquakes and tornadoes, expose gaps in protection that need addressing. For instance, many homeowners do not buy flood insurance because their mortgage lender doesn't require it or they simply do not perceive themselves as being at risk. When Hurricane Harvey hit Texas, 41% of homes in the flooded areas were outside of FEMA's high-risk zones. Yet, homeowners in these “lower-risk” zones found their homes inundated by flooding and most of those homes were uninsured for flood.

New technologies and the sharing economy are both a benefit and a threat to society. Internet of things devices that protect our homes and businesses have also increased our vulnerability to hackers. A thermometer that monitored, from a distance, the water temperature, salt content, and regular feeding for a fish tank in a Las Vegas casino served as the perfect entry point for cybercriminals to gain access to the casino's main network and its data. Those engaged in the sharing economy, including ride-hailing services and short-term lodging services, have discovered they have exposed themselves to liability issues that may not be contemplated by their insurance policies.

The upside to this new risk reality is the significant opportunities for our industry to help fill those gaps. But, first, we must create awareness of the risks and their impacts. One way to accomplish this is to work more closely with trusted advisers, such as insurance and real estate agents, mortgage lenders, lawyers and accountants. Our industry must help these stakeholders better understand the risks and the importance of sharing that information with their clients.

The re/insurance industry is also in a position to support and work closely with associations and public/private entities that are committed to helping society understand and protect against risk, such as the Institute for Business and Home Safety, the Insurance Information Institute and the California Earthquake Authority.

Finally, our industry has a tremendous opportunity to help fill the potential insurance gap by developing or modifying products and services. Fortunately, the competitive nature of the re/insurance industry is already resulting in the development of new coverages and approaches to mitigating risk.

Policies are available that respond to liability issues that may arise when people rent out their personal primary home for a few nights or a few weeks. Underwriters are talking to insurance brokers about why farmers need specialized property and liability coverage for commercial drones that help them monitor their crops and livestock in fields far from the barn. There's also been a trend for insurers to offer their cyber insurance customers a suite of services pre- and post-breach and expanded first-party cyber breach response expenses to address new risks such as business interruption, ransomware and extortion attacks, and business email compromise.

The role of the re/insurance industry is to help protect people, communities and businesses from the risks that are emerging so that they can go from harmed to whole as quickly as possible. By identifying and creating awareness of the risks and providing insurance protection and services to help mitigate the threat, the industry is addressing the new risk reality head on and working toward fulfilling its mission to society.

Best’s Review contributor Tony Kuczinski is president and CEO of Munich Reinsurance America Inc. He can be reached at

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