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Lloyd's America President: Business Leaders Concerned About New Types of Risk

Source: A.M. Best


Posted on 20 Dec 2011

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The top five risks on the minds of business leaders today aren't easily solved by purchasing insurance, said Hank Watkins, president of Lloyd's America.

"Traditional risks that I've grown up in the industry finding solutions for -- wind, earthquake, flood -- aren't even in the top 30 anymore," Watkins said.

He was responding to the second Lloyd's Risk Index, which found the economic turmoil that has swept the world has left business leaders with the sense that they are operating in a more perilous environment today.

Lloyd's last did the survey two years ago, in the wake of the 2008 financial crisis. Then, in 2009, the top three risks prioritized by business leaders were the cost and availability of credit, currency fluctuation and insolvency risk.

Today, the availability of credit has dropped from the number one risk to number six, replaced by loss of customers and orders as businesses' primary concern, the survey found.

"People are not spending the money that they were," Watkins said. "It suggests things have not gone in the right direction."

Currency fluctuation remains a major concern, moving from number two in the survey two years ago to number four today.

But the risk posed by "talent and skills shortages" has shot up from the middle of about 50 concerns to the number two position, according to the survey.

"You would think with unemployment everywhere, why would that be a problem," Watkins said. "You can always hire people, but they might not be the right kind of people. It's hard to find the right talent."

Reputational risk has shot up in concern from number nine in 2009 to three in 2011.

That's due in part to reputational crises such as the leak of oil drilling rig Deepwater Horizon and recalls by car manufacturers, Watkins said.

"It can take you years to build your brand, and then minutes to destroy it," he said.

Insurers, including Lloyd's syndicates, offer crisis management insurance after a crisis, but not insurance to help prevent one from happening, Watkins noted.

The other two risks that popped up in the top five this year are the effects of currency regulation and changing legislation.

One bright spot in the survey: The biggest reduction in priority has been "insolvency," which has dropped from third place in 2009 to just 29 in 2011.

The Lloyd's Risk Index 2011, which followed on from the first index published in 2009, was based on a survey conducted by the Economist Intelligence Unit. The survey, which was conducted in August 2011, was based on responses from more than 500 senior executives in a number of sectors. The financial services industry provided the largest representation.


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