Cyber Risk, Changes in Legislation, and Climate Change: Trouble Ahead in 2020
In Allianz’s ninth annual Risk Barometer report, released January 14, 2020, experts from over 100 countries identified “cyber incidents” as the most important business risk globally, as well as the most important business risk in the U.S. Globally, “cyber incidents” stand alongside “business interruption” (second place) and “changes in legislation and regulation” (third place) as the top three business risks. In the U.S., “natural catastrophes” was also named a top three risk, following several years of record-breaking NatCat damages—though the report did note global NatCat losses were down 20% in 2019. “Climate change”was also top of mind for participants, taking its highest rank yet in seventh place.
Experts cited the recent “significant increase in the number of ransomware incidents” as one of the reasons companies should be aware of cyber risk in 2020. “The costs of a cyber incident are rising across the board, a product of growing complexity, more stringent regulation, and the damaging consequences to a business from a loss of data or critical systems,” said Marek Stanislawski, deputy global head of cyber at AGCS.
- Jody Westby, CEO of Global Cyber Risk, writes frequently on cybersecurity issues for Leader’s Edge. Read her advice on how to respond to a ransomware attack, and her list of 20 steps businesses can take to reduce cybersecurity risk going into 2020.
The report also noted the increasing costs associated with litigation and recent cyber regulation, including the EU’s General Data Protection Regulation (GDPR), California’s California Consumer Protection Act (CCPA), and the NAIC Model Law, which has been adopted either wholly or partly by seven states and counting. Regulatory actions (especially those flowing from the GDPR) can come with punishing fines, but these new laws also empower consumers and other affected parties to pursue litigation against companies that mishandle their data.
- Law firm Steptoe & Johnson’s Scott Sinder and Eva Rigamonti offer compliance tips on the GDPR for Leader’s Edge.
Lastly, according to the report, Allianz’s estimates show “responding to the challenges posed by climate change could cost companies worldwide as much as $2.5 trillion over the next 10 years.” In particular, the “increasing volatility in weather” was named as the most significant component of climate change-related risk—exemplified by 2017, during which “Houston experienced its third ‘500-year flood’ in less than four decades,” “California suffered five of its 20 most destructive wildfires ever,” and “41 million people in Bangladesh, India, and Nepal were affected by flooding and monsoon rains.”
- In its most recent issue, Leader’s Edge tackles various threats to our physical environment, including those caused by climate change.
Thanks to recent developments in insurance-driven technological innovation, brokers are better positioned now more than ever to provide front-end, real-time risk mitigation services to their clients. Brokers’ singular perspective in a world of growing and evolving risks is essential for assisting their clients in developing a robust, proactive risk management plan. In a firming market, one of the best ways to differentiate your firm from others is to be the trusted advisor your client needs.