Insurance industry playing ‘catch up’ on cyber: Swiss Re’s Petrilli

By Cate Chapman on September 22, 2015

cyber-riskThe Executive Risk Network caught up with Bob Petrilli, CEO of North America for Swiss Re Corporate Solutions, to get his take on some of the current and emerging risks facing executives.

What do you see as the greatest risks facing executives?  

Today, executives face myriad challenges. Most fall into the category of “Reputational Risk.”

Cyber liability is certainly a major reputational risk, and one that needs a lot of attention, but reputational risks go far beyond cyber.

Mass product recalls and broad climate change and environmental concerns are on the radar for regulators and NGOs. And with an ever globalizing, interconnected market, so are issues that could trigger investigations under the Foreign Corrupt Practices Act (FCPA). We are seeing a marked upswing in Department of Justice investigations targeting individual executives. These are all fodder for reputational risk and brand damage.

Every CEO knows it is far beyond the skills of a good PR department to keep those things from damaging the bottom line. Cyber, in particular, and technology/innovation, in general, are what will continue to get the biggest headlines because the landscape changes so rapidly. The ability to both understand and protect against or transfer these risk is in its infancy. There are many ways these risks can damage a company and they are all daily concerns for senior executives. To paraphrase Ben Franklin – it takes many good deeds to build a good reputation and only one bad one to destroy it.

What do you think will be the next emerging executive risk?

We are currently in the midst of the next wave. Data breach litigation and scrutiny over executives’ roles in safeguarding their companies (and customers) are under the microscope. I think this is the beginning of a larger risk landscape emerging that is related to technology and the expanding use of social media and “big data.”

Bob Petrilli, CEO of North America, Swiss Re Corporate Solutions

Bob Petrilli, CEO of North America, Swiss Re Corporate Solutions

From your perspective does regulation, litigation, legislation or a combination drive these risks?

It really is a combination of all three. Cyber is an interesting one. While cyber coverage has been around for about 15 years (originally driven by state legislation) it is now clearly being driven by litigation. I have no doubt that this will spur new regulation on the issue. I imagine we will see additional guidance from the SEC regarding cyber responsibilities of executives and boards in the near future. Public outcry has driven specific regulatory changes as well, such as new rules relating to executive compensation and additional disclosures around pay ratio—a developing risk we will see play out over the next few years.

Is the insurance industry doing enough to adequately quantify and address these risks?

On the cyber topic, I think the insurance industry is playing “catch up” to be frank. Swiss Re Corporate Solutions has always been at the forefront of understanding emerging risks, and we have put tremendous resources into understanding, for example, the rapidly changing risk landscape due to technology and innovation. But for many of the other risks that might emerge due to changing regulation, legislation and a creative plaintiff’s bar, it is difficult to see around the next corner. It’s critical to engage in ongoing dialogue with clients, understand how they see their own risk landscapes developing and then ensure that as a risk-transfer partner we address their risks well enough to instill long-term confidence.

What keeps you awake at night?

Honestly, my biggest concern is the number of senior level, expert underwriters who are on the verge of retiring. There is a critical mass of underwriting experience and leadership that is within a decade of disappearing, and there will be a significant knowledge gap for the industry. This is not good for carriers or for clients.

I think the industry is doing a much better job at recruiting the next generation. The incoming talent is impressive but the industry has a lot of knowledge to transfer. We need to keep new talent engaged and transfer our passion and knowledge to this new generation on things like technology, emerging risks, social issues and climate issues. We need to pair new talent with highly experienced underwriters so that they can truly understand the business of insurance. New risks will always emerge, but the generation entering the industry now can take us to a new level.