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Emerging risks present threats and opportunities

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CHICAGO — Yesterday’s emerging risks are today’s legacy issues, Barry Franklin, senior vice president and chief risk officer at Zurich North America, said Tuesday.

Citing the example of the move to adjustable mortgage rates to boost home ownership, Mr. Franklin said the subsequent defaults and foreclosures proved to be worse than the original problem.

Tools that require years of data are of little value when assessing emerging risks, which presents the challenge of how a risk manager can foresee or prevent them. But Mr. Franklin said there are ways to help quantify emerging risks, such as assigning a priority to various risks and extending projections out for up to five years.

“Emerging risks aren’t going to be found in underwriting policies or contemplated in insurance language; they go beyond the bounds of existing underwriting and pricing practices. They tend to be things we haven’t thought about; insurance policies are for what you intend to cover,” Mr. Franklin said during the Risk & Insurance Management Society’s Enterprise Risk Management conference in Chicago.

Sometimes, emerging risks also present opportunity.

For example, he said, the aging workforce can mean more business for financial planners and retirement communities. And while cyber risks are growing, they present an opportunity for cyber security and automation providers, he said.