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Advisen Front Page News - Wednesday, March 30, 2022

   
Supply chain bottlenecks rise to the top in emerging issues 'tournament'

Advisen

Supply chain bottlenecks rise to the top in emerging issues 'tournament'

By Alex Zank, Advisen

Insurance industry observers picked supply chain disruptions and bottlenecks as the biggest problem of 2022, placing it above social inflation, according to Verisk’s annual Emerging Issues Bracket Challenge.

The supply chain bottlenecks are felt across many industries, including insurance, according to Verisk. The COVID-19 pandemic and a subsequent shift toward online shopping created both supply disruptions and heightened demand. Images of cargo ships backed up at major ports made the issue visible to the public eye.

“The bottom line is, supply chain disruption is more visible than ever, and it’s at the global level,” Christopher Sirota, product manager for emerging issues at Verisk, said in a recent interview with Advisen. Climate change and global civil unrest, along with the pandemic, make up the three main drivers of supply chain disruption, he said.

The Verisk bracket challenge, now in its ninth year, is a single-elimination, tournament-style matchup similar to the NCAA March Madness basketball tournament. Along with supply chain disruption and social inflation, ransomware and PFAS rounded out the final four.

Voters consider emerging issues in head-to-head matchups, with the “winners” advancing to the next round. Some contests were close, with many issues advancing by a slim margin, according to Verisk. PFAS put up a good fight against social inflation, for instance, according to Sirota. The issue is not going away, due to increases in both the number of lawsuits and the amount of research into the health impacts of PFAS, he said.

Social inflation, the runner-up, is an ongoing challenge in the minds of industry officials. It refers to higher insurance claims costs due to increased litigation and larger jury awards. Verisk actuaries found social inflation partly to blame for an increase in loss ratios from 2015 on, said Sirota.

Fueling social inflation, Sirota said, is the rise in litigation funding, or when unrelated third parties finance lawsuits in exchange for a portion of the jury awards.

“I think the litigation funding aspect is continuing to increase, so I don’t see that disappearing from reaching the later rounds in our Emerging Issues Bracket Challenge any time soon,” he said.

Ransomware remained a top issue for voters. The risk did not advance from the first round when it first appeared in the challenge in 2017 but progressed each following year until it made runner-up in 2020. “It’s clearly become top-of-mind for insurers,” Verisk noted.

Sirota said ransomware continues to expand as a threat because of the improvement in technology available to cybercriminals, such as ransomware-as-a-service platforms.

Other issues with deep tournament runs include future pandemics, wildfires, cryptocurrency, and infrastructure.

Reporter Alex Zank can be reached at alex.zank@zywave.com

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