Emerging Opportunities Report
The environment, technology and even sporting events are changingrapidly--and with these changes come new business opportunities for brokers
Insuring the Intense
Extreme sporting events offer serious challenges not only to participants, but to brokers trying to find coverage for them
By Tom Butler
Extreme sports are entering the world at a rapid pace. Take Tough Mudder, for example. What is a Tough Mudder? I guess it is someone who, at his own discretion and of apparently sound mind, has decided to endure a hardcore 10- to 12-mile obstacle race. This race is, of course, through mud—hence the “Mudder.” The race was designed by a team from the British Special Forces to challenge the toughest of the tough.
They think that’s tough? Tough is trying to find coverage for an event where people knowingly push themselves to the maximum limit and beyond—where men, women, young, old, athletes with disabilities, and so on, are expected to drop 15
feet into mud, with no cushion or padding, and crawl, climb, jump and fall to complete the race.
Tough Mudder is just one example of the many new extreme sporting events occurring across the country, but there are countless others—such as trampoline volleyball tournaments, skateboarding competitions and other obstacle races. For these events, ensuring that the coverages afforded under a commercial general liability policy (CGL) are commensurate with the risk is a top priority for any broker. Firstly, the broker needs to really understand the sport or event and its unique set of rules and regulations. These are generally “very raw,” and truly need to be discussed and understood by the broker, who then needs to get this information to the marketplace and find possible carriers that might dare take a chance insuring this new sport/event. In these cases, the more information, the better for the broker, as the underwriters will need to understand the risk to rate and put appropriate terms and conditions together. As often happens, if there is a lack of information on a new sport/event, underwriters will offer high quotes with large deductibles and restrictive terms and conditions.
Coverages will vary depending on the type of event, but Participant Legal Liability is one key coverage that brokers should recommend to clients hosting extreme sporting events. These events are often all about the participants racing to be the best or fastest, and most extreme sports participants are very competitive. This coverage is not always afforded to clients and has a few variations, such as Participant-to-Participant coverage, which provides coverage for participants who are racing or competing against other participants, and who might do something to cause bodily injury to another participant in the course of the event. A racecar driver, for example, could knowingly ram or cut off another driver to win a race. There are many variations to this coverage; hence why it is important.
Fracture Indemnity, a part of a Participant Accident policy, provides first party medical coverage for a bone fracture in a participant’s body, and is another unique coverage clients should consider—especially given the nature of these events.
As a broker, there are also important risk management suggestions you can offer your clients that will help them run the safest events possible. On top of standard first aid kits, suggest having defibrillators strategically placed on site. Clients should also review waivers and waiver protocols to make sure that they adhere to the standards of the province in which the event is held.
The organizers of these events are getting far more inventive in terms of what they’re offering to extreme sports junkies— but they do not always consider insurance. This is where the broker comes in. Brokers must make sure they are offering the most comprehensive product at the most affordable price.
Tom Butler is vice-president and general manager of K&K Canada.
Invasive species are driving a growing climate change consulting and contractor business
By Kim Neale
The first things a visitor to Prince George, BC notices as she approaches the city are the rolling mountains and hills. By British Columbian standards, the mountains appear ordinary, but to an outsider, the odd mottling of deep green and brownish-purple trees is a striking sight reminiscent of an algal bloom in a polluted lake. These oddly coloured trees have been infested by the mountain pine beetle, an invasive species that lays its eggs in the bark of pine trees and introduces a fungus that prevents the tree from repelling the beetle’s attack. Historically, the beetle has been kept in check by the cold winters in northern BC, but it has spread in recent years due to mild winters caused by climate change. Some experts claim that the mountain pine beetle is responsible for killing more than 50% of BC’s commercial forestry resources over the past 15 years.
The damage to BC forests has given rise to an emerging and highly specialized industry of climate change consultants and contractors who protect natural resources by developing plans for containing and monitoring invasive species.
This new breed of consultants and contractors are guided by the rules and regulations introduced by the BC government as part of its invasive species strategy. The strategy details the overall approach to containing the spread of the mountain pine beetle, but also sets limits on the tactics used by consultants and contractors in order to protect the local environment. Consultants and contractors who violate the rules and regulations, even accidently, expose themselves to the risk of significant fines. As the mountain pine beetle and other invasive species spread across the country, each province will develop their own strategies and regulations that will expose consultants and contractors to risk.
As new plans are enacted, contractors and consultants will test and implement techniques that may inadvertently put natural resources at risk. That could mean the chemicals being used to try and contain an environmental threat end up
adversely affecting the wrong species or polluting nearby lakes and rivers. If that happens, contractors and consultants can find themselves liable not only for regulatory fines and penalties issued by the government, but also for the damages to any natural resources. For instance, any impact on fish spawning rates can potentially be linked to herbicides and pesticides, and contractors can be pulled into claims that result from the change to the natural environment.
A good insurance provider will provide risk management solutions to help contractors and consultants navigate through licensing and registration requirements and provide customized solutions that fit. Most notably, they will provide coverage for natural resources damage that goes above and beyond the bodily injury, property damage and clean-up costs coverage you might see in most Commercial General Liabilities and pollution policies in Canada. A truly best-in-class combined package will provide natural resources damage and fines and penalties coverage.
Kim Neale is a senior environmental underwriter at Burns & Wilcox Canada.
Cyber extortion is an increasingly popular form of attack that requires its own insurance solution
By Marijana Dabic
The digital world that we live in, with its ever-increasing number of companies that rely on the Internet for their business, has created a highly fertile ground for cyber crime. According to Norton’s Cybercrime 2012 report, 70% of online adults in Canada have been the victim of cybercrime at some point in their life. Cybercrime costs Canadians $1.4 billion per year and the average cost per crime victim is over $160.
Cyber criminals are increasingly attacking businesses, and new forms of cyber crime are emerging rapidly, which can often leave the insurance industry one step behind. One example of cyber attack that is becoming increasingly popular is
threats and extortion. Cyber threats and extortion is a type of online crime involving an attack or threat of attack against a company to damage, expose or shut down information belonging to the company unless a ransom is paid.
In these types of attacks, cyber extortionists steal information from businesses and encrypt it so it can’t be read. The latest backup of data can also be snatched and the original data deleted from the owner’s servers. Cyber extortionists thus take the company data hostage and demand ransom in exchange for the decryption key that would allow the victims to access their own information. However, the criminals won’t necessarily decrypt the files even after the ransom had been paid. Further attacks are possible, either by the same group or another.
The type of malware used in these cyber attacks is called ransomware and it is easily spread through spam, phishing emails and malvertising. The ease of spreading the malware, combined with little or no repercussions for criminals—who are hard to track down or prosecute— can make cyber extortion a lucrative undertaking. Often, cyber extortionists’ worst-case scenario is not getting payment from a victim.
In many cases, the amount of money asked for ransom is significantly lower than the potential financial loss for the company, so it is easier for the company to pay the ransom and move on. These types of attacks, unless they happened at
a large public company or a government entity, often don’t get reported to authorities and never reach the public, as the victims often don’t want to risk their reputations or destroy consumer confidence.
To manage and minimize the potential damage from a cyber attack, companies should employ a comprehensive cyber risk management strategy that, along with a cyber insurance policy, also includes appropriate loss control techniques, an assessment of the company’s network vulnerabilities and employee security awareness training.
There are many different cyber insurance policies that provide various coverages. Brokers should make sure that their clients’ cyber insurance policies cover costs in case the company is unable to access its computer system, the system is infected by a virus, confidential information is compromised or its brand and reputation are tarnished by posts on social media.
In addition, the policy should cover: the cost of an independent computer security consultant to assess and prevent any threats; the cost of a reward to prevent perpetrators from committing the attack; and the cost of reimbursing any ransom that the company is required to pay in the event the above measures fail to mitigate the threat against them.
Marijana Dabic is VP Business Development at ABEX, Affiliated Brokers Exchange Inc.
Copyright 2014 Rogers Publishing Ltd. This article first appeared in the April 2014 edition of Canadian Insurance Top Broker magazine