Slideshow The Top 10 Extreme Risks Facing Insurers

  • December 09 2013, 11:01pm EST
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The assessment of risk comes almost second-nature to insurance professionals. But according to a recent survey by Towers Watson, there are still extreme risks that can keep insurance executive awake at night. As part of the professional services company’s regular biennial analysis of the extreme risks likely to affect the broader investment community, Towers Watson polled insurance executives to categorize the rare events that would have a significant impact on global economic growth and asset returns if they occurred. More than 30,000 votes were compiled in a wiki survey, which enabled participants to add their own ideas. What follows are the top 10 extreme risks as identified by the respondents.

10. Sovereign Default

Nonpayment by a major sovereign borrower causes market panic and disrupts the global economy.

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9. A Rise in Extreme Weather

Events exceed the capacity of insurance industry and governments to respond, with physical and social implications.

8. An Extreme Event

An event that causes property damage, supply-chain failures, business interruption and death on a significant scale.

7. Banking Crisis

Central banks unable/unwilling to supply liquidity in the next crisis, causing banking and real economic activity to stop.

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6. Depression

A deep and protracted trough in economic output, massive increase in unemployment, restriction of credit and shrinking investment.

5. Technology

A large quantity of personal, government or business data stored in clouds are found to be hacked, compromised or misused.

4. Cyber-warfare

Computer sabotage/espionage on a major scale, with severe damage to infrastructure, financial, medical or defense systems.

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3. Food/Water/Energy Crisis

A major shortfall in the supply of, or access to, food/water/energy, causing severe societal issues.

2. Natural Catastrophe

A confluence of major earthquakes, tsunamis, hurricanes, flooding and/or volcanic eruptions with major global effects.

1. Pandemic

A new, highly infectious and fatal disease spreads through human, animal or plant populations worldwide.