Francis Kean

D&O – Reservation of Rights Leaving You Exposed

Imagine you have just been shipwrecked. You spot two lifeboats. One is virtually empty and seems completely sea worthy. The other is overcrowded, listing badly and taking on water. You make it across to the first one and are just about to climb on board when a man leans over the side and says you're not allowed on board and that you'll have to swim for the other one. That's what it might feel like in a large Directors & Officers claim when you realize that insurers' reservation of rights with respect to coverage apply to you as an innocent director as much as to your colleagues accused of fraud or dishonesty.

David Shuey

Life Science – Hidden Risks of Outsourcing R&D

The life science industry has evolved away from centralized research, development, and commercialization. Now, many companies look like Frankenstein's monster with many critical business operations bolted on via outsourcing contracts. To make matters worse, many of these activities are performed by foreign entities. The complex supply chain that results hides many risk hobgoblins. Like ghosts, many of these risks are invisible until one of them decides to manifest with disastrous results.

Paul Greve

Health Care – Jumbo Malpractice Verdicts

The scariest risk in health care in 2013 is the potential for a jumbo medical malpractice verdict ($50 million or more). In many of these jumbo verdicts the patient suffered profound neurological impairment requiring a lifetime of expensive care. Many of the cases arose in the obstetrical setting, especially the classic claim of failure to diagnose and/or timely respond to fetal distress during labor. However, there are also cases involving nursing home patients, which exceed $100 million. They are reason to bear in mind the old adage: “An ounce of prevention is worth a pound of cure.”

Richard Magrann-Wells

Financial Institutions – Runaway Computer Trading

This year financial institutions learned in a most visceral way that the markets have the potential to destroy an institution with blinding speed. With the introduction of algorithmic trading and other computer-executed transactions, it is becoming more difficult for humans to act as “circuit-breakers” when the programs go awry. The only viable solution is ironclad controls that mandate systems with adequate procedures in place to deal with any possible errors. Remember it's not actually the speed that's the problem—it's hitting the wall that hurts.

Kevin Wilkes

Security – The Relentless Wave of Violence

From a small classroom in Sandy Hook to a shopping mall in Kenya, from the athletes of the Boston Marathon to the workers of the D.C. Navy Yard, one thing remains clear: Today, perhaps more than ever before, risk leaders must take steps to prepare for the worst. Domestically or internationally, those who fail to take steps now to mitigate its crushing effects could find themselves or their organizations overwhelmed and lost in the wake of its destruction. Instead, transform this wave of senseless loss into a wave of action, an opportunity to address or re-address issues of workplace violence, campus violence, facility protection, and crisis management planning.

Sharon Kimmel

Personal Insurance – Being Caught Without a Disaster Plan

“Everyone has a plan 'til they get punched in the mouth.” ~Mike Tyson

Lots of Americans got punched this year, with wildfire in Yosemite, flooding in Colorado, tornadoes in Oklahoma, Missouri, Mississippi, a fertilizer plant explosion in Texas and record-breaking snow in the Mid-West and New England. Natural and not-so-natural disasters are rare for most of us, but they are frightening for all of us. Surviving them can depend on having a plan in place.

Julien Combeau

Environment – M&A “Clean Exits” Getting Dirty

When it comes to environmental liabilities, the cleanest exit on paper can get dirty if historic pollution happens to be found by the buyer or the neighbors of the property after the sale. Due to the “polluter pays” principle applicable in many jurisdictions or the burden of maintaining an escrow large enough for a long time, a seller can be caught up and need to financially “re-enter” in a settlement. Hopefully, they can turn to environmental insurance to help their exits to stay “clean” in the long run.

Robin Somerville

Energy – Arctic Disaster

Relatively high oil prices, together with advances in technology, have meant that hitherto unattainable hydrocarbons under the Arctic ice shelf are now able to be extracted and produced profitably. However, the shadow of Macondo continues to haunt the exploration and production industry, as a major pollution incident in the Arctic on the scale of that disaster could prove to be catastrophic for all concerned—not only would the cost of clean-up be exorbitant, but the political ramifications could well mean a total suspension of Arctic E&P activity.

Ann Longmore

Executive Risk – The Wrath of the Whistleblower

In today's age of the whistleblower—with state, local, and possible federal protection, including Sarbanes-Oxley and Dodd-Frank—the global challenge is to treat seriously each and every report of possible organizational misconduct rather than focus on a witch hunt into the possible motivation of the tipster. Failing to do so (perhaps the one time that the blind squirrel finds the nut), may have serious implications for organizations and executives. The least of which could include fines, penalties; the most serious of which could be the loss of reputation.

Tim Mathieson

China – Tainted Food Supply

Although their cuisine is amongst the tastiest in the world, China's residents are increasingly scared about what is really going into their food. In 2008, melamine-tainted milk powder sickened hundreds of thousands of babies and killed six. We've also had recycled “gutter” oil, cadmium-tainted rice, hormone-overdosed “instant” chickens, rat-dressed-up-as-lamb and exploding watermelons (hormones again). The list is stomach-churningly long and includes some foreign brand names as well.

Steve Leggett

Fidelity – Disabled Safeguards

A company was doing work on its computer system (timed so that certain functionality was affected only in the wee hours of the night). They happened to be a financial institution and their employees could trade on their own margin accounts up to a maximum limit of a not-very-scary $10,000. It just so happened that while the upgrade was being made to the firm's system, and certain controls were disabled, an employee trading on his personal account from his home computer realized that he could make trades far in excess of $10,000. By morning, this enterprising individual believed that he had amassed a nine-figure profit. Instead, when the markets opened, the night owl had “earned” his company losses in excess of $100M.

Ann Longmore

Cyber – Individual Suckers; Corporate Losses

At Halloween, some of us dress up as spider man, or pirates, or princesses—but the “Nigerian princes” are out there every day trying to lure the unwary into wiring them money, and it is not only individuals who fall prey to these scams. In at least one instance, the firm was the victim of a phishing scam in which hackers gained access to the firm's computers…Wire fund transfer fraud is pretty scary stuff—easy to do and scary across all industries.

Fiona Shaw

Industry & Agriculture – Water Scarcity

One seriously scary risk is the risk of interruption, from whatever cause, to our ability to access water. No longer solely a concern for the areas of the world where there is little rainfall, water scarcity is a global concern affecting both rural and urban communities, businesses and households….What if the tap was turned off? Our access to water denied! This might be due to contamination of drinking water on a national scale, a failure in the supply infrastructure or a consequence of drought. Do you have a survival plan?

Ann Longmore

Fiduciary – Suspicious Returns

Be afraid—be very afraid—of investments that promise high returns with low risk…Several pension plans learned this the hard way after investing about $100 million in a fund promising steady high returns with, you guessed it: low risk. To lure them to their doom, the fiduciaries had been promised (double pinky swear!) that if the investments returned less than a set return, an unnamed financial backer would make up the difference. Instead of the guaranteed 12% return (spooky), the fund yielded sub-par returns—and law suits on behalf of plan participants.

Anthony Wagar

Environment – Pollution Exclusions

Companies are scared to death that they could have a claim that's not covered under their current insurance program. Environmental claims are no exception and are one of those hidden risks that always seem to be lurking in the dark. Unfortunately, risk managers can't look to their standard general liability and/or property policies to respond, as the pollution exclusions function to provide very limited, if any, coverage for a variety pollution exposures and risks that exist.

Dave Passman

Property – Perfect Storms

Last year, two days before Halloween, New York sustained a fright night like no other in recent memory. Not only did storm surge from “Superstorm Sandy” cause extensive damage to numerous buildings housing many financial institutions along Water Street (appropriately named) and other buildings in the financial district but also caused extensive damage to New York's infrastructure (subways, tunnels, etc.) and power outages throughout lower Manhattan. Next time? Think about Hollywood disaster movie-type flooding in major oceanfront cities and urban areas, then add 120-mile-per-hour winds and you have the makings of a catastrophic event of the magnitude not previously considered.

Jim Blaney

Employee Benefits – The Self-Insured Scare

Under the Patient Protection and Affordable Care Act (“PPACA”), fully insured plans are subject to new taxes and mandates that will increase the costs of coverage for employers. Therefore, many employers who never considered self-funded plans have begun to consider them to avoid potential cost increases. In fact, carriers and other providers are introducing products with much lower attachment points for the stop-loss (needed for all self-insured plans) than had traditionally been the case, permitting much smaller employers to consider self-funding their plans. Several states have begun to take steps to regulate stop-loss coverage the same way they regulate fully insured plans. In addition, the Department of Labor has indicated it will now explore treating self-funded plans as insured plans, requiring the same mandates and expenses that self-funding was intended to avoid. If this occurs, it could eliminate an arrow in the cost management quiver for employers, and is a direct threat to employer flexibility and the protections that ERISA offers to employers who offer medical plans to employers….

Wendy Peters

Terrorism – TRIA: Trick or treat on Capitol Hill.

For most U.S. companies the continued availability of sufficient property and casualty terrorism insurance will become a significant issue in the coming months, with the reauthorization of the Terrorism Risk Insurance Program Reauthorization Act of 2007 (formerly known as “TRIA”) in jeopardy. The Act sunsets December 31, 2014 and with TRIA not on the 2013 agenda, it is feared that a disinterested Congress will not take up the issue until late in 2014, causing major market disruption.