Julian James, Director of Worldwide Markets at Lloyd’s, in a speech given last week to business leaders in Singapore and Hong Kong, stated that the costs of risk are continuing to rise.
James, attributed the rise in premiums to three key factors: “a more litigious society, an increase in the exposures for intangible risks and the events of September 11th.”
James explained that lawsuits, particularly against corporate managers, were increasing, and are no longer limited to the Unites States. He also indicated that the rapid growth of the Internet not only increased known risks related to fraud, potential third party liabilities and copyright issues, but also exposed companies to new liabilities, notably the risk of disseminating viruses to clients and suppliers, and that reputational risks and supplier risk had all increased in recent years.
Focusing on the events of September 11, James stated that the attacks had changed the way the world thinks about the risk of terrorism. Insurers are now forced to look at terrorism as a separate risk that should be rated and priced accordingly. He also noted that this approach could be applied to many other risks in future.
“In this new environment, the trend is to provide tailored coverage that responds to specific exposures rather than global policies in which specific exposures are not appropriately recognised and priced,” James emphasized. “New risks are continuing to emerge as our ways of doing business changes and technology advances and the perception and assessment of familiar risks like terrorism is continuing to shift,” he concluded.