These 3 Risk Categories Worry Brokers and Risk Managers the Most

But despite an awareness of growing exposures like cyber hacking and climate change, few entities are taking proper steps to prepare.
By: | November 2, 2018 • 4 min read

Rapid technological advancement is reshaping the risk landscape for businesses of all shapes and sizes — and the carriers that insure them. A recent survey produced by international specialty insurer Argo Group queried 200 insurance brokers and 150 small- to medium-sized businesses (SMEs) in the UK and U.S. about the top risks on their radar.


Though opinions diverged on some specific threats, technology was the common thread linking nearly every top risk.

1) All Things Cyber and Tech-Related Liability

All 200 brokers and 126 SMEs ranked cyber threats as a medium or high priority risk over the next year. The survey does not specify, however, what “cyber threat” means to the respondents. Given the many shapes and forms of cyber risk, the category is broad and could encompass everything from a breach of private data, a ransomware or denial-of-service attack, or any type of system shutdown or network failure.

Concern over cyber is not limited to the direct impact to respondents’ respective companies. Forty-nine percent of brokers ranked Russian cyber hacking as the biggest potential global threat to their clients.

The speed of development makes it hard for businesses to evaluate all the risks; by the time risk managers get a handle on the implications of one piece of technology, a newer version has emerged.

Behind cyber, brokers were most concerned about the Internet of Things, drones and blockchain technology. All of which carry an element of cyber risk. SMEs were most concerned with virtual technology, the IoT, and climate change. Seventy-eight percent also said they believe automation and artificial intelligence will create new liabilities.

With the exception of climate change, these concerns reflect an uncertainty that perhaps stems from the pace of technological change and the inability to know where it’s going next. The speed of development makes it hard for businesses to evaluate all the risks; by the time risk managers get a handle on the implications of one piece of technology, a newer version has emerged.

Despite the acknowledgement of cyber as a high-priority risk, SME responses indicate that they may be underprepared. Sixty-one percent said that they do feel prepared, and yet 43 percent reported they did not plan to buy cyber insurance. Other surveys back this up. According to Hiscox’s 2018 Small Business Cyber Risk Report, “sixty‑six percent of small businesses said they were concerned or very concerned about cyber risk. Yet the vast majority haven’t taken the basic steps to prepare. Fifty percent said lack of budget is a challenge or a major challenge.”

2) The Underwriting Talent Gap 

Technology — or lack thereof — may also play a role in one of the greatest risks facing the insurance industry today: an underwriting talent shortage. According to Argo’s report, 35 percent of brokers say slowness to innovate is a factor making the industry appear less attractive to younger workers.

“Across the board, there is some reluctance among both brokers and SMEs to innovate with new technology,” the report states, citing cost as the greatest barrier. Forty-five percent of brokers and 41 percent of SMEs listed cost as the primary roadblock to implementing new tech.

At a time when risks emerge and evolve faster than ever, lack of underwriting talent devoted to understanding these exposures will exacerbate the industry’s greatest vulnerability.

However, 32 percent of brokers also said that a general lack of knowledge about the insurance industry is also driving the talent shortage, suggesting that greater efforts must be made to engage students before they enter the workforce.

At a time when risks emerge and evolve faster than ever, lack of underwriting talent devoted to understanding these exposures will exacerbate the industry’s greatest vulnerability.

3) Geopolitical Instability and Climate Change 

Tech-related risks, however, are not the only areas of concern. An unstable geopolitical environment weighs heavily on the minds of both brokers and SMEs. In addition to Russian hacking and election interference, brokers also ranked the trade war between the U.S. and China (45 percent), terrorism (43 percent), America’s divisive political climate (42 percent), a deteriorating relationship with Iran (26 percent) and escalating tension with North Korea (22 percent) as major global threats.


SMEs were less concerned with geopolitical risks than they were with climate change. Sixty-seven percent of SMEs said they were cognizant of the long-term impacts of climate change, compared to 47 percent of brokers.

Indeed, losses from natural catastrophes and extreme weather has been rising steadily, with the expectation that they will only continue to grow. According to a report by Scientific American, “The insurance industry is among the most exposed sectors of the global economy to the effects of climate change, and those risks could grow as coastal cities expand.” In 2017, total financial losses from natural catastrophes in both the private and public sector hit $134 billion.

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at

Risk Scenario

A Recall Nightmare: Food Product Contamination Kills Three Unborn Children

A failure to purchase product contamination insurance results in a crushing blow, not just in dollars but in lives.
By: | October 15, 2018 • 9 min read
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.


Reilly Sheehan, the Bethlehem, Pa., plant manager for Shamrock Foods, looks up in annoyance when he hears a tap on his office window.

Reilly has nothing against him, but seeing the face of his assistant plant operator Peter Soto right then is just a case of bad timing.

Sheehan, whose company manufactures ice cream treats for convenience stores and ice cream trucks, just got through digesting an email from his CFO, pushing for more cost cutting, when Soto knocked.

Sheehan gestures impatiently, and Soto steps in with a degree of caution.

“What?” Sheehan says.

“I’m not sure how much of an issue this will be, but I just got some safety reports back and we got a positive swipe for Listeria in one of the Market Streetside refrigeration units.”



Sheehan gestures again, and Soto shuts the office door.

“How much of a positive?” Sheehan says more quietly.

Soto shrugs.

“I mean it’s not a big hit and that’s the only place we saw it, so, hard to know what to make of it.”

Sheehan looks out to the production floor, more as a way to focus his thoughts than for any other reason.

Sheehan is jammed. It’s April, the time of year when Shamrock begins to ramp up production for the summer season. Shamrock, which operates three plants in the Middle Atlantic, is holding its own at around $240 million in annual sales.

But the pressure is building on Sheehan. In previous cost-cutting measures, Shamrock cut risk management and safety staff.

Now there is this email from the CFO and a possible safety issue. Not much time to think; too much going on.

Sheehan takes just another moment to deliberate: It’s not a heavy hit, and Shamrock hasn’t had a product recall in more than 15 years.

“Okay, thanks for letting me know,” Sheehan says to Soto.

“Do another swipe next week and tell me what you pick up. I bet you twenty bucks there’s nothing in the product. That swipe was nowhere near the production line.”

Soto departs, closing the office door gingerly.

Then Sheehan lingers over his keyboard. He waits. So much pressure; what to do?

“Very well then,” he says to himself, and gets to work crafting an email.

His subject line to the chief risk officer and the company vice president: “Possible safety issue: Positive test for Listeria in one of the refrigeration units.”

That night, Sheehan can’t sleep. Part of Shamrock’s cost-cutting meant that Sheehan has responsibility for environmental, health and safety in addition to his operations responsibilities.

Every possible thing that could bring harmful bacteria into the plant runs through his mind.

Trucks carrying raw eggs, milk and sugar into the plant. The hoses used to shoot the main ingredients into Shamrock’s metal storage vats. On and on it goes…

In his mind’s eye, Sheehan can picture the inside of a refrigeration unit. Ice cream is chilled, never really frozen. He can almost feel the dank chill. Salmonella and Listeria love that kind of environment.

Sheehan tosses and turns. Then another thought occurs to him. He recalls a conversation, just one question at a meeting really, when one of the departed risk management staff brought up the issue of contaminated product insurance.

Sheehan’s memory is hazy, stress shortened, but he can’t remember it being mentioned again. He pushes his memory again, but nothing.

“I don’t need this,” he says to himself through clenched teeth. He punches up his pillow in an effort to find a path to sleep.


“Toot toot, tuuuuurrrrreeeeeeeeettt!”

The whistles of the three lifeguards at the Bradford Community Pool in Allentown, Pa., go off in unison, two staccato notes, then a dip in pitch, then ratcheting back up together.

For Cheryl Brick, 34, the mother of two and six-months pregnant with a third, that signal for the kids to clear the pool for the adult swim is just part of a typical summer day. Right on cue, her son Henry, 8, and his sister Siobhan, 5, come running back to where she’s set up the family pool camp.

Henry, wet and shivering and reaching for a towel, eyes that big bag.

“Mom, can I?”

And Cheryl knows exactly where he’s going.

“Yes. But this time, can you please bring your mother a mint-chip ice cream bar along with whatever you get for you and Siobhan?”

Henry grabs the money, drops his towel and tears off; Siobhan drops hers just as quickly, not wanting to be left behind.


“Wait for me!” Siobhan yells as Henry sprints for the ice cream truck parked just outside of the pool entrance.

It’s the dead of night, 3 am, two weeks later when Cheryl, slumbering deeply beside her husband Danny, is pulled from her rest by the sound of Siobhan crying in their bedroom doorway.

“Mom, dad!” says Henry, who is standing, pale and stricken, in the hallway behind Siobhan.

“What?” says Danny, sitting up in bed, but Cheryl’s pregnancy sharpened sense of smell knows the answer.

Siobhan, wailing and shivering, has soiled her pajamas, the victim of a severe case of diarrhea.

“I just barfed is what,” says Henry, who has to turn and run right back to the bathroom.

Cheryl steps out of bed to help Siobhan, but the room spins as she does so.

“Oh God,” she says, feeling the impact of her own attack of nausea.

A quick, grim cleanup and the entire family is off to a walk-up urgent care center.

A bolt of fear runs through Cheryl as the nurse gives her the horrible news.

“Listeriosis,” says the nurse. Sickening for children and adults but potentially fatal for the weak, especially the unborn.

And very sadly, Cheryl loses her third child. Two other mothers in the Middle Atlantic suffer the same fate and dozens more are sickened.

Product recall notices from state regulators and the FDA go out immediately.

Ice cream bars and sandwiches disappear from store coolers and vending machines on corporate campuses. The tinkly sound of “Pop Goes the Weasel” emanating from mobile ice cream vendor trucks falls silent.

Notices of intent to sue hit every link in the supply chain, from dairy cooperatives in New York State to the corporate offices of grocery store chains in Atlanta, Philadelphia and Baltimore.

The three major contract manufacturers that make ice cream bars distributed in the eight states where residents were sickened are shut down, pending a further investigation.

FDA inspectors eventually tie the outbreak to Shamrock.

Evidence exists that a good faith effort was underway internally to determine if any of Shamrock’s products were contaminated. Shamrock had still not produced a positive hit on any of its products when the summer tragedy struck. They just weren’t looking in the right place.


Banking on rock-solid relationships with its carrier and brokers, Shamrock, through its attorneys, is able to salvage indemnification on its general liability policy that affords it $20 million to defray the business losses of its retail customers.


But that one comment from a risk manager that went unheeded many months ago comes back to haunt the company.

All three of Shamrock’s plants were shuttered from August 2017 until March 2018, until the source of the contamination could be run down and the federal and state inspectors were assured the company put into place the necessary protocols to avoid a repeat of the disaster that killed 3 unborn children and sickened dozens more.

Shamrock carried no contaminated product coverage, which is known as product recall coverage outside of the food business. The production shutdown of all three of its plants cost Shamrock $120 million. As a result of the shutdown, Shamrock also lost customers.

The $20 million payout from Shamrock’s general liability policy is welcome and was well-earned by a good history with its carrier and brokers. Without the backstop of contaminated products insurance, though, Shamrock blew a hole in its bottom line that forces the company to change, perhaps forever, the way it does business.

Management has a gun to its head. Two of Shamrock’s plants, including Bethlehem, are permanently shuttered, as the company shrinks in an effort to stave off bankruptcy.

Reilly Sheehan is among those terminated. In the end, he was the wrong person in the wrong place at the wrong time.

Burdened by the guilt, rational or not, over the fatalities and the horrendous damage to Shamrock’s business. Reilly Sheehan is a broken man. Leaning on the compassion of a cousin, he takes a job as a maintenance worker at the Bethlehem sewage treatment plant.

“Maybe I can keep this place clean,” he mutters to himself one night, as he swabs a sewage overflow with a mop in the early morning hours of a dark, cold February.


Risk & Insurance® partnered with Swiss Re Corporate Solutions to produce this scenario. Below are their recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

Shamrock Food’s story is not an isolated incident. Contaminations happen, and when they do they can cause a domino effect of loss and disruption for vendors and suppliers. Without Product Recall Insurance, Shamrock sustained large monetary losses, lost customers and ultimately two of their facilities. While the company’s liability coverage helped with the business losses of their retail customers, the lack of Product Recall and Contamination Insurance left them exposed to a litany of risks.

Risk Managers in the Food & Beverage industry should consider Product Recall Insurance because it can protect your company from:

  • Accidental contamination
  • Malicious product tampering
  • Government recall
  • Product extortion
  • Adverse publicity
  • Intentionally impaired ingredients
  • Product refusal
  • First and third party recall costs

Ultimately, choosing the right partner is key. Finding an insurer who offers comprehensive coverage and claims support will be of the utmost importance should disaster strike. Not only is cover needed to provide balance sheet protection for lost revenues, extra expense, cleaning, disposal, storage and replacing the contaminated products, but coverage should go even further in providing the following additional services:

  • Pre-incident risk mitigation advocacy
  • Incident investigation
  • Brand rehabilitation
  • Third party advisory services

A strong contamination insurance program can fill gaps between other P&C lines, but more importantly it can provide needed risk management resources when companies need them most: during a crisis.

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