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Examine risks to find opportunities

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BOCA RATON, Fla. — Today's environment has pockets of opportunity for insurers and most risks are insurable, including hard-to-calculate ones such as technology, cyber and natural disasters, but captive owners need to examine all aspects of a risk before insuring it, experts say.

“We need to find the drivers behind emerging risks, and the changing risks can be especially difficult to quantify. These can add risk to businesses and insurers,” said Thomas Holzheu, New York-based chief economist for the Americas at Swiss Re American Holding Corp. during the World Captive Forum in Boca Raton, Florida.

“We're trying to look at how we can protect our companies, but what can we learn about natural risks such as weather or climate change? We know there are some factors beyond our control, but we need to understand those risks as well and adjust accordingly,” Linda Conrad, New York-based director of strategic business risk management at Zurich Global Corporate, said Wednesday at the forum.

Cyber tops the list of captive risks for the next decade.

An Aon Risk Solutions report shows cyber risk growing from 8% of underwriting globally to 23% within the next five years. “Forty percent of cyber incidents are accounted to malicious attacks,” Ms. Conrad said, “but then there is 60% left over. What is going on there? We need to look beyond the data.”

“We don't know as much about cyber at this time as other risks, so the size of the risk appetite of the insurance company also needs to be taken into account,” said Mr. Holzheu. “You will need to find out if it is digestible to the carrier or to the insurance industry as a whole.”

Examining risks also may show other opportunities, Ms. Conrad said.

Basically any risk can be insurable, she said. “It depends on how good your planning is and how much risk you want your captive to take on.”