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Emerging Risk Report: Q3 2017
November 01, 2017
XL Catlin’s Emerging Risk Task Force actively monitors a wide array of emerging risks to provide our underwriters, as well as clients, with pertinent information regarding new and existing emerging risks. This quarterly report provides key highlights and developments for the emerging risks that have recently generated notable activity and media attention.
North America’s opioid epidemic
- In the U.S. and Canada there has been increased concern and attention around opioids abuse and misuse in the population. Over the last few years, authorities have raised alarm at the widespread abuse of opioid drugs as the rate of deaths and overdoses have increased exponentially.
- Opioids are an addictive class of drugs that interact with opioids reactors in nerve cells in the body and brain. They include pain relievers available by prescription such as oxycodone, hydrocone, codeine, morphine and others. The illegal drugs heroin and fentanyl are also opioids. Efforts to control illegal use of prescription drugs are believed to have inadvertently led to increased demand for these illegal drugs.
- Over the past several months, states and municipalities in the United States have sued large pharmaceutical companies, as well as suppliers, distributers and physicians, etc. for their alleged contribution to the growing opioids epidemic.
- While these lawsuits vary, most states and municipalities are seeking to recover the social and economic cost associated with opioid abuse including lost productivity, healthcare and rehabilitation costs as well as criminal justice and law enforcement costs.
- These cases could point to a potential shift in litigation where restitution (in this instance) is not only being sought by individuals (claiming specific bodily injury) but also by state and local governments claiming harm against the public (i.e. “public nuisance litigation”). It remains to be seen how the courts will rule.
- This has also become a concern for the Federal Reserve of the US, who cited opioids abuse as a key factor in the country’s decline in labor force participation and consequently affecting the economy.
- Current and future opioids litigation could affect casualty / liability lines of business, such as product liability, medical malpractice (i.e. claims against doctors failing to prescribe opioids correctly) and worker’s compensation (i.e. increased costs from claims).
Medical marijuana vs federal/state law
- Despite several U.S. states having legalized marijuana for recreational and medical uses in recent years, marijuana is still classified as a Class A drug which makes it illegal under U.S. federal law.
- Consequently, in addition to new challenges from the reported increased collision frequency in auto claims in states allowing recreational marijuana, U.S companies and their insurers also face challenges dealing with company drug policies and the legal ramifications.
- The issue remains that state and federal laws regarding employee consumption of marijuana in the workplace are in sharp contrast to one another. While marijuana use may be legal under a state law, a user may be in violation of company and federal drug-free workplace mandates.
- Key concerns from recreational / medical marijuana for insurers are increased auto claims, employee discrimination suits and worker’s compensation.
- It is worth noting that over the past few years, there have been a number of courts ruling in favor of employee drug use where necessary for medical reasons under state law. In any case, the future remains uncertain in light of the prevailing federal law.
Blockchain: Changing insurance status quo
- The insurance process remains fairly lengthy and labor-intensive, involving details shared between multiple parties with limited efficiency and collaboration between stakeholders. Blockchain technology is seen as one of several technologies to shift how business is managed in increasingly data-driven, connected and regulated markets.
- A blockchain, by definition, is a decentralized ledger that allows each authorized users access to verifiable information and history of a business transaction from a single source.
- The concept of blockchain within the insurance industry is quickly moving from concept to applicability, with XL Catlin involved in two pioneering initiatives:
- B3i is an insurance consortium of 15+ companies collaborating on a combined ledger optimized for reinsurance transactions. The blockchain process would address the inefficiencies in sharing information across markets in a reinsurance deal. The concept is a distributed ledger smart contract system, facilitating the agreement and settlement processes across markets to the benefit of both the client and insurer.
- XL Catlin has also been involved in the world’s first marine insurance Blockchain platform, due to be implemented in early 2018. This initiative will connect clients, brokers, insurers and third parties to common ledgers capturing information on each risk in the insurance contract. The value comes from greater visibility to changes and new information, details on transactions, payments and up-to-date information on notifications / loss data.
Read more on the basics of Blockchain technology on Fast Fast Forward: