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This Week in Risk Management — September Issue #1


Key Takeaways

One part of the world is on fire, the other part is underwater, and we’re all trying to figure out how these disasters will impact us in the future. So, let’s talk about all things risk management — at least, for this week.

Hurricane Ida Could Cost Insurers $18B

The Caribbean and US experienced substantial damage from Hurricane Ida, the Category 4 storm that made landfall in the US late last month. Insurance analysts predicted a hefty fallout and were surprised that the actual cost — closer to $18 billion — will likely land on the low end of predictions.

Still, the damage will hit Swiss Re and Lancashire’s the hardest, leaving Hannover Re and Munich Re experiencing the least pressure. From privately insured residential to commercial to industrial properties, the damage is extensive. And we can’t forget that boats, offshore properties, and various other losses won’t be covered.

Unfortunately, rebuilding will be a bear, thanks to the pandemic-induced inflation of lumber prices. Although Hurricane Ida won’t be as devastating as Katrina in 2005, coming back from this loss will be tough.

Hurricane Ida Compounds Supply-Chain Issues for Cannabis

The COVID-19 pandemic proved to be a headache for most businesses, cannabis included. However, Hurricane Ida has just turned a headache into a massive migraine for the cannabis industry. For starters, the storm shut down several medical marijuana dispensaries in Louisiana and bottlenecked the Port of New Orleans.

Business owners lucky enough to maintain power are now hanging on for dear life. Logistics are now complicated, and many businesses trying to scale are experiencing yet another delay. The cannabis industry relies on a stable chain-supply system to expand. But what they’ve gotten is one bump in the road after another.

We anticipate this most recent roadblock to hike up cannabis pricing in other parts of the country. Many business owners are committed to overstocking their inventory to play it safe — if they can get it shipped to them, that is. Hurricane Ida gave the cannabis industry a swift kick in the shins, and we’re all going to feel the sting sooner or later.

Cybercriminals Are Targeting “Uninsurable” Businesses Down Under

It’s no surprise that cyberattacks, specifically ransomware, have spiked 170% in the past year. What’s more, cybercriminals are demanding higher ransoms than ever before, with US payouts at an astronomical amount. And still, many business owners, like the ones in Australia, are taking a nonchalant stance — for now.

The crux is that many Aussie business leaders think purchasing a cyber liability insurance policy is the end of their job. Cyber coverage — check; now, we’re safe. But think again. Insurers are scratching their heads in disbelief and placing more responsibility on business owners.

For example, insurers are lowering limits, increasing premiums, and questioning how their clients mitigate cyber risks. Some will deny a claim if a business can’t prove they followed best cybersecurity practices. Others declare various companies as “uninsurable” if they lack cybersecurity knowledge and have a blase approach.

The lesson here? First, get (and stay) in the know. Second, cyber liability insurance alone isn’t enough. We must mitigate the threat of cyberattacks and follow best practices to fill the gap in cybersecurity, or we’re toast.

Property Insurance Could Skyrocket Due to Climate Risks

By now, we all know that our climate is changing rapidly. What many of us don’t know is how the climate risks we face will shape our future. But insurers have an idea. According to Deloitte, insurance regulators have started to sharpen their focus, addressing the risk and hoping to achieve more resilience in the future.

However, climate risks will undoubtedly impact our lives and insurance premiums in the next twenty years. Swiss re predicts climate risks to add $183 billion to property insurance costs by 2040. Fingers crossed that the cost hike won’t be too jagged a pill for property owners to swallow.

California Wildfires Make Insurers Rethink Their Strategy

While one part of the US is flooding, the other part is on fire. And insurers are feeling the hurt from both sides of the country. That said, the California wildfires are on track to break loss records, ruining tens of thousands of homes and buildings. But insurers weren’t too surprised as many had already dropped policies in various counties based on the increased fire risk.

Unfortunately, more insurers are following suit — residential and commercial — refusing to insure properties in the “hot zones.” Policies aren’t being renewed, and many requests for insurance have been blatantly denied. We see it first hand, too, as we experience difficulty placing coverage in Northern California. So, property owners must decide if rebuilding is worth it. “Will we get insurance?” many are asking. And the answer, sadly, is that we simply don’t know at this point.

Cognizant’s $95M Settlement With Shareholders — Will Insurers Pay It?

From our experience, it’s not uncommon for directors and officers to expect their insurance carriers to pick up the bulk of a D&O settlement. The real question is always whether they will. It’s no different in the massive class action settlement case involving the technology company, Cognizant.

According to Insurance Journal, “Cognizant Technology Solutions Corp. has reached a $95 million settlement to resolve a lawsuit accusing the information technology services company of defrauding shareholders by concealing bribes to officials in India.” So, will Cognizant’s carrier pay up? Only time will tell; however, while we all hold our breath, tell us what you think.

Until next time…

Founder Shield specializes in knowing what risks your industry faces. So, talk to us! Contact us at info@foundershield.com or create an account here to get started on a quote.

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