Category Archives: Emerging Risks

Business Risk, Catastrophes, Cyber Risk, Emerging Risks, Terrorism Risk

Intent and ability distinguish cyberrisk from natural perils

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Cyberrisk is often compared with natural catastrophe-related threats, but a recent study by global reinsurer Guy Carpenter and analytics firm CyberCube suggests a better analogy is with terrorism.

“Probability is assessed in terms of intent and capability.”

The report – Looking Beyond the Clouds: A U.S. Cyber Insurance Industry Catastrophe Loss Study – quotes Andrew Kwon, lead cyber actuary for Zurich: “Extending the lessons learned from property cats to the cyber space is intuitive and logical, but cyber continues to be a unique force unto itself. A hurricane does not evolve to bypass defenses; an earthquake does not optimize itself for maximum damage.”

This passage resonated as I read it because a few hours earlier I’d been reading a FreightWaves article about risks posed to international shipping by digitalization and pondering the fact that the same technology that helps vessels anticipate and avoid adverse weather also subjects them – and the goods they transport – to a panoply of new risks.

The FreightWaves article quotes U.S. Navy Captain John M. Sanford – who now leads the U.S. Maritime Security Department within the National Maritime Intelligence Integration Office – describing how the NotPetya virus inflicted $10 billion of economic damage across the U.S. and Europe and hobbled company after company, including shipping giant Maersk, in 2017.

Sanford said Russian military intelligence was behind the hacker group that spread NotPetya to damage Ukraine’s economy. The virus raced beyond Ukraine to machines around the world, crippling companies and, according to an article in Wired, inflicting nine-figure costs where it struck.

“Maersk wasn’t a target,” Sanford said. “Just a bystander in a conflict between Ukraine and Russia.”

Collateral damage.

The FreightWaves article describes how supply chains, ports, and ships could be disrupted more intentionally through GPS and Electronic Chart Display and Information System (ECDIS) systems onboard ships, or even via a WiFi-connected printer: “Pirates working with hackers could potentially access a ship’s bridge controls remotely, take control of the rudder, and steer it toward a chosen location, avoiding the expense and danger of attacking a vessel on the high seas.”

The Carpenter/CyberCube report identifies parallels in the deployment of “kill chain” methodologies in both conventional and cyber terrorism: “Considering terrorism risk in terms of probability and consequence, probability is assessed in terms of intent and capability.”

As our work and personal lives become increasingly interconnected through e-commerce and smart thermostats and we look forward to self-driving cars and refrigerators that tell us when the milk is turning sour, these considerations might well give us pause.

Hurricanes, earthquakes, fires, and floods might be scary, but at least we never had to worry that they were out to get us.

 

Emerging Risks, Health & Safety

I.I.I. Report: Marijuana legalization raises concerns about drugged driving

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The “green gold rush” shows no sign of slowing.

Most recently, New Jersey legislators reportedly announced a bill that would permit recreational marijuana. If signed into law, New Jersey would join ten other states and D.C. that currently permit recreational marijuana. More than 30 states and D.C. also permit medical marijuana programs of some kind.

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But as legalization spreads, concerns about driving under the influence of marijuana continue unabated.

Today, the I.I.I. has published a report that examines the current state of the issue.

“A rocky road so far: Recreational marijuana and impaired driving” dives into the hazy questions surrounding marijuana impairment: its effects on driving abilities, how traffic safety might be impacted, and how states are grappling with the issue of “stoned driving.” (Download the report here.)

Unfortunately, there are still many unknowns when it comes to stoned driving. Marijuana impairment degrades cognitive and motor skills, of course – but marijuana-impaired driving is an evolving issue with many questions and few concrete answers. Legalization is still relatively recent. Data are still being gathered. How to understand and measure marijuana impairment are still open questions.

Do the rates of marijuana-impaired driving increase following recreational legalization? Answer: probably. Does marijuana-impaired driving increase crash risks? Answer: probably, but we still don’t concretely know to what degree. What about traffic fatalities – do those increase after legalization? There’s evidence that traffic fatalities could increase following legalization, but there is still quite a bit of discussion about this issue.

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There is active research, discussion and debate being conducted to answer these and other questions. As more states legalize recreational marijuana, forthcoming answers will become ever more critical to help best guide public policy and traffic safety initiatives.

To learn more, download the report here.

Emerging Risks

Medical marijuana is not a prescription drug

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marijuana is a drug, but not a “drug”

I’m going to get a little wonky here, bear with me.

The standard homeowners insurance policy only explicitly mentions the word “marijuana” once: to exclude it from liability coverage. Basically, the policy says that the insurer won’t pay for any bodily injuries or property damage to another person arising out of any controlled substance, including marijuana.

But there’s an interesting wrinkle to this. The exclusion also states the following: “However, this exclusion does not apply to the legitimate use of prescription drugs by a person following the orders of a licensed physician.”

“Wait,” you say. “Isn’t there a conflict here? Wouldn’t the policy cover damages from medical marijuana, since it’s a prescription drug?”

Sorry to rain on your parade, but the answer is no.

All together now: Medical marijuana is not a prescription drug

You can be forgiven for thinking that medical marijuana is a prescription drug. After all, that’s how it’s often described by news outlets the world over: Wall Street Journal, New York Times, Washington Post, etc.

But medical marijuana is not a prescription drug under any state’s current medical marijuana program.

Physicians don’t “prescribe” marijuana like they do painkillers and other drugs. Rather, physicians will “certify,” “recommend,” or “authorize” (the exact wording depends on the state) that a patient qualifies under a state program to purchase marijuana products. Often this qualification depends on whether a patient suffers from any of a list of “qualifying conditions” – which vary by state.

With a “recommendation” in hand, the patient can then purchase medical marijuana products from a dispensary, subject to various state-specific limitations (like how much marijuana they can buy in any given month).

“Prescription”, on the other hand, has a specific meaning. The Kansas City Medical Society notes that medical drugs are supported by years of study that can provide guidelines for dosages and plans of care. The U.S. Food and Drug Administration regulates these drugs. Patients with a prescription receive these drugs from a certified pharmacist.

Not so with marijuana. Though some states do require physician dosage recommendations, these are not well understood. The FDA has “not approved marijuana as a safe and effective drug for any indication.” Medical marijuana dispensaries are not pharmacies. They don’t employ pharmacists. The people selling the marijuana are basically like knowledgeable sommeliers at a fancy liquor store.

As we saw above, this distinction has insurance implications. As another example, consider workers’ compensation insurance: do these policies reimburse for an injured worker’s medical marijuana? The answer is far more complicated than you’d think.

One more time: medical marijuana is not a prescription drug.