Emerging Exposures
CAS Annual Meeting – San Francisco
Raji Bhagavatula, FCAS
Principal
November 14, 200606
Emerging Exposures- Basic Questions
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Are they insurable?
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Can they be underwritten?
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Are you able to price for emerging
exposures?
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Emerging Exposures- Lessons From
History
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The loss quantification exercises have been
reserving exercises rather than pricing
exercises.
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They seem to creep into the claims historythe insurer had no intention of covering
them, has not underwritten them, has not
specifically priced for them at the time of
underwriting.
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Emerging Exposures- Insurer
Obligations
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Liability insurance is “all risks” insurance“the insurer will indemnify against all sums
which the insured shall become legally liable
to pay as damages and claimants costs and
expenses-------------------------“
Emerging risks have to be dealt with in
exclusions
A lot of imagination is needed to come up
with the exclusions at the time of
underwriting.
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Emerging Exposures- Insurability
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Risk has to be random and unambiguous
Risk must be estimable
There must be a causal relationship
between the action or omission by the
insured and the resulting property damage,
bodily injury or financial loss
The loss must be independent of the volition
of the party generating the loss
Emerging exposures do not satisfy the
criterion of insurability
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Emerging Exposures-Underwriting
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Underwriters need to understand the art and science
of the business of the insured. Need to be able to
imagine futuristic scenarios.
Time limits for reporting and payout of claims
Well crafted exclusions
Dollar limits on payments
Bear in mind that the legal landscape is continually
changing- what is covered is subject to interpretation
and reinterpretation.
The interests of the insurance company and insured
have to be aligned.
Use of warranties
Geographic area limitations
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Nanoparticles- Next Asbestos?
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Experts view the emergence of nanotechnology as the next industrial
revolution- (Asbestos the miracle mineral!)

Nanotechnology has the potential to embrace a broad spectrum of
products and applications-( Asbestos was used in over 3000 products
and touched all but a few industries)

Expert opinions vary markedly over the potential risks associated with
nanoparticles; while some believe that risks outweigh benefits others
believe that nanoparticles will harm living creatures by virtue of their size(Asbestos fibers are small; nanoparticles are smaller!!)
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Nanoparticles can be inhaled, can be absorbed through the skin, may be
ingested- Although risks unknown have the potential to give rise to many
more ailments than asbestos.
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The people exposed likely in higher income brackets than asbestos
victims
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Loss accumulation potential due to latency – (Similar to asbestos many
policy periods may be impacted)
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