Emerging risks and insurability in a complex environment

Transcription

1 Emerging risks and insurability in a complex environment Dr. Markus Wadé Integrated Risk Management Group Accumulation & Emerging Risks Sopot, 7 May 2014

2 Organisation of Munich Re Munich Re (Group)* Reinsurance Munich Health Primary Insurance Corporate Insurance Partner Great Lakes Reinsurance (UK) PLC KA Köln.Assekuranz Agentur GmbH MSF Pritchard Syndicate 318 Temple Insurance Company Watkins Syndicate Belgium Asset management *This listing is incomplete and provides no precise indication of shareholdings. Emerging risk management Dr. Markus Wadé

3 Agenda Knowledge and insurability Emerging risk management at Munich Re Challenge of increasing interconnectedness and complexity Emerging risk management Dr. Markus Wadé

4 What defines the limits of insurability and private insurance? Supply side Demand side Perceived insurability - Randomness - Definite loss - Calculability of loss (e.g. frequency, severity) Risk awareness Risk appetite Willingness and ability to buy insurance cover at a given price Availability of capital Regulatory restrictions Role of public vs. private insurance Emerging risk management Dr. Markus Wadé

5 Knowledge and the limits of private insurance Insurability Unknown unknowns Known unknowns / Emerging risks Mature risks Limits of insurance Knowledge? Judgement Quantification Emerging risk management Dr. Markus Wadé

6 Corporate risk manager: Of all the risks I have there are 7% 93% Not Insurable Insurable Emerging risk management Dr. Markus Wadé

7 Paradigm-changing events for risk management (Examples) Starting 1970s/80s Asbestos Terror-attack on WTC

8 Major global trends in the risk landscape with increasing complexity and interdependencies New technologies Globalization/ Urbanization Climate change/ Scarcity of raw materials Increased regulation & market volatility Demographic development Significant consequences of these trends already observable Speed of transition and future impact hard to forecast Emerging risk management Dr. Markus Wadé

9 Definition of emerging risks at Munich Re Emerging risks (ER) are newly developing or changing risks They include trends and potential shock events with a high degree of uncertainty (occurrence probability, loss amount) a substantial potential impact on an organization Identification Analysis Management Emerging risk management Dr. Markus Wadé

10 Emerging risk management framework The ER Think Tank is an international, heterogeneous & inter-disciplinary team of specialists The ER Process is managed by the ER Core Team (Steering Committee) Life Claims Non-Life Claims UW Monthly meetings ERGO Corporate UW Integrated Risk Mgmt ALM IRM Group-/ RI-Dev. Group Development Emerging risk management Dr. Markus Wadé

11 Integrating knowledge from a group-wide ER community and external experts Internal Round tables / Conference calls: Europe & North America Asia & Australia Africa & South America External Clients (e.g. CRO Forum Emerging Risk Initiative) Non-governmental organizations Regulatory authorities Universities, research institutes Emerging risk management Dr. Markus Wadé

12 Emerging risks recently analysed Focus topic cyber risks Related publications Dependency on IT infrastructure Cyber liability IT viruses Cloud computing Cyber war Selected topics discussed in 2012/2013 Technology at the limits of controllability Biometrics Social media Artificial Intelligence Privatisation of government responsibilities Solar storms Obesity Scarcity of resources Protectionism Migration of species Loss of biodiversity Contentious diseases Autonomous vehicles Counterfeit products Distressed cities Food security & safety Wind turbines Hydrofracking Social unrest Emerging risk management Dr. Markus Wadé

13 Output of the emerging risk process Identification Analysis Management Long-list of potential ER ER radar Fact sheets Topic paper Scenarios Guidelines and controls Model adjustments New services or products Reporting Annual Emerging Risk Report Board submissions Emerging risk management Dr. Markus Wadé

14 Increasing global interdependences have an impact on the insurance industry Complex loss scenarios Characteristics Historical data less reliable /not available Contagion effects and indirect consequences become more important Robust, but fragile phenomena Triggers and courses of loss events harder to identify, model and control Higher frequency of surprises Source Network: World Economic Forum, Global Risks 2014 Protecting diversification benefits becomes more difficult Danger of a widening gap between client needs and limits of insurability Emerging risk management Dr. Markus Wadé

15 Project: Development of systematic risk landscape for events and interactions Structure of CARE Society & Politics * * * Environment & Nature * * Economy * * * * * Technology Target is the systematic identification of complex loss scenarios using interdisciplinary expert knowledge Emerging risk management Dr. Markus Wadé

16 To analyze the collected information efficiently, we are currently developing a software tool Interactions are used to construct event cascades or networks of variable depth Emerging risk management Dr. Markus Wadé

17 External emerging risks information by Munich Re The Group Emerging Risks Emerging risk management Dr. Markus Wadé

18 Münchener Rückversicherungs-Gesellschaft 2013 Munich Reinsurance Company Thank you very much for your attention Dr. Markus Wadé