RIMS 2016

The Battle for New Orleans: And 99 Other Cities

The 100 Resilient Cities initiative continues to grow in the U.S. and globally.
By: | April 11, 2016 • 2 min read

New Orleans went down once.

It cannot afford to go down again.

As one of 68 cities that is currently taking part in the 100 Resilient Cities initiative, the Big Easy appointed a Chief Resilience Officer and created a resiliency strategy.

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The hope is that New Orleans, which is still at 85 percent of its pre-Katrina population, can forestall another disaster of that scale and avoid a crippling population loss.

The initiative, funded by the Rockefeller Foundation in conjunction with global reinsurer Swiss Re, aims to bring a private sector concept, the chief risk officer, into the public sector, where fading infrastructure and limited budgets create a pressing need for holistic risk management.

Alex Kaplan, a North American sales leader, public sector business, for the Zurich-based reinsurer, said global private sector risk management knowledge can be brought to bear to make cities better at disaster recovery, and retain their lifeblood, the very citizens who pay their taxes.

“After a disaster what a city wants is not a check. They want their subway to work, they want their water system to work,” said Kaplan, who sat down with R&I at the RIMS Conference in San Diego on April 10.

In January, Swiss Re announced a partnership with Veolia, the venerable French-headquartered engineering and environmental firm with global reach.

With their combined strength, the reinsurer and the engineering firm aim to provide cities all over the globe with the engineering knowledge to strengthen their key assets, and the risk transfer muscle to speed recovery should those precious assets be damaged.

“Veolia is 160 years old,” Kaplan said.

“After a disaster what a city wants is not a check. They want their subway to work, they want their water system to work.” — Alex Kaplan, North American sales leader, public sector business, Swiss Re

“They focus entirely on infrastructure in the space of water, energy and waste. They can take over assets such as water plants and run them themselves or enter into a partnership with the city to help them optimize performance,” he added.

“Not only are they getting the best service, but they are also saving money simultaneously,” he said of the cities engaged in the initiative.

Additional key pieces for this resiliency equation are modeling and risk transfer.

Jamie Miller, a managing director of Swiss Re and its North America Property head, said the venerable Swiss insurer’s data bases and modeling capabilities can also be shared with public sector leaders to good effect.

“We are taking the modeling science and our risk appetite and some of our other ideas and coupling it with a societal need, whether it is climate change, pandemic or some other emerging risk,” Miller said.

Using state of the art analytics to measure the amount of passenger volume a particular subway route can hold, or the cost to a city of removing three inches of snow, gives public sector leaders a way to measure and mitigate or transfer risk that they didn’t have before, Miller said.

Over time, Swiss Re and other highly rated carriers will join together, to provide capital backstops to the public sector in a way that hasn’t been done before, he said.

“This is going to lead to greater syndication in the public space,” Miller said.

By the end of May, Kaplan said 100 Resilient Cities will announce the remaining 32 cities that will take part in the program.

Cities in the U.S. that are in more advanced stages of the program, which launched in 2013, include quake-exposed San Francisco, Norfolk, Va., and hurricane-exposed New Orleans.

The Rockefeller Foundation provides funding for the hiring of a chief resilience officer for a few years and the resources to build a resilience strategy.

But it’s not just physical damage that is the focus of many risk-focused civic leaders.

Societal problems such as affordable housing and egregious income inequality are also a focus, Kaplan said.

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“Whereas we are thinking about hurricanes and earthquakes and tsunamis, they are thinking about aging infrastructure, social inequality, fragmented communities,” Kaplan said.

“So they are thinking about the social aspects as well, and I would say each city that has announced their strategy is paying homage to both,” Kaplan said.

“When a city is responding to a disaster the day the shock occurs, they have to quickly figure out what broke, who can fix it, how long it is going to take and where is the money coming from?”

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2017 RIMS

Resilience in Face of Cyber

New cyber model platforms will help insurers better manage aggregation risk within their books of business.
By: | April 26, 2017 • 3 min read

As insurers become increasingly concerned about the aggregation of cyber risk exposures in their portfolios, new tools are being developed to help them better assess and manage those exposures.

One of those tools, a comprehensive cyber risk modeling application for the insurance and reinsurance markets, was announced on April 24 by AIR Worldwide.

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Last year at RIMS, AIR announced the release of the industry’s first open source deterministic cyber risk scenario, subsequently releasing a series of scenarios throughout the year, and offering the service to insurers on a consulting basis.

Its latest release, ARC– Analytics of Risk from Cyber — continues that work by offering the modeling platform for license to insurance clients for internal use rather than on a consulting basis. ARC is separate from AIR’s Touchstone platform, allowing for more flexibility in the rapidly changing cyber environment.

ARC allows insurers to get a better picture of their exposures across an entire book of business, with the help of a comprehensive industry exposure database that combines data from multiple public and commercial sources.

Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

The recent attacks on Dyn and Amazon Web Services (AWS) provide perfect examples of how the ARC platform can be used to enhance the industry’s resilience, said Scott Stransky, assistant vice president and principal scientist for AIR Worldwide.

Stransky noted that insurers don’t necessarily have visibility into which of their insureds use Dyn, Amazon Web Services, Rackspace, or other common internet services providers.

In the Dyn and AWS events, there was little insured loss because the downtime fell largely just under policy waiting periods.

But,” said Stransky, “it got our clients thinking, well it happened for a few hours – could it happen for longer? And what does that do to us if it does? … This is really where our model can be very helpful.”

The purpose of having this model is to make the world more resilient … that’s really the goal.” Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

AIR has run the Dyn incident through its model, with the parameters of a single day of downtime impacting the Fortune 1000. Then it did the same with the AWS event.

When we run Fortune 1000 for Dyn for one day, we get a half a billion dollars of loss,” said Stransky. “Taking it one step further – we’ve run the same exercise for AWS for one day, through the Fortune 1000 only, and the losses are about $3 billion.”

So once you expand it out to millions of businesses, the losses would be much higher,” he added.

The ARC platform allows insurers to assess cyber exposures including “silent cyber,” across the spectrum of business, be it D&O, E&O, general liability or property. There are 18 scenarios that can be modeled, with the capability to adjust variables broadly for a better handle on events of varying severity and scope.

Looking ahead, AIR is taking a closer look at what Stransky calls “silent silent cyber,” the complex indirect and difficult to assess or insure potential impacts of any given cyber event.

Stransky cites the 2014 hack of the National Weather Service website as an example. For several days after the hack, no satellite weather imagery was available to be fed into weather models.

Imagine there was a hurricane happening during the time there was no weather service imagery,” he said. “[So] the models wouldn’t have been as accurate; people wouldn’t have had as much advance warning; they wouldn’t have evacuated as quickly or boarded up their homes.”

It’s possible that the losses would be significantly higher in such a scenario, but there would be no way to quantify how much of it could be attributed to the cyber attack and how much was strictly the result of the hurricane itself.

It’s very, very indirect,” said Stransky, citing the recent hack of the Dallas tornado sirens as another example. Not only did the situation jam up the 911 system, potentially exacerbating any number of crisis events, but such a false alarm could lead to increased losses in the future.

The next time if there’s a real tornado, people make think, ‘Oh, its just some hack,’ ” he said. “So if there’s a real tornado, who knows what’s going to happen.”

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Modeling for “silent silent cyber” remains elusive. But platforms like ARC are a step in the right direction for ensuring the continued health and strength of the insurance industry in the face of the ever-changing specter of cyber exposure.

Because we have this model, insurers are now able to manage the risks better, to be more resilient against cyber attacks, to really understand their portfolios,” said Stransky. “So when it does happen, they’ll be able to respond, they’ll be able to pay out the claims properly, they’ll be prepared.

The purpose of having this model is to make the world more resilient … that’s really the goal.”

Additional stories from RIMS 2017:

Blockchain Pros and Cons

If barriers to implementation are brought down, blockchain offers potential for financial institutions.

Embrace the Internet of Things

Risk managers can use IoT for data analytics and other risk mitigation needs, but connected devices also offer a multitude of exposures.

Feeling Unprepared to Deal With Risks

Damage to brand and reputation ranked as the top risk concern of risk managers throughout the world.

Reviewing Medical Marijuana Claims

Liberty Mutual appears to be the first carrier to create a workflow process for evaluating medical marijuana expense reimbursement requests.

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.

RIMS Conference Held in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]