Monthly Archives: July 2011

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Wall Street Uses Risk Management?

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In attempting to describe the behavior on Wall Street in recent years, the term “risk management” probably won’t be near the top of anyone’s list. But when it comes to the nearing possibility of the United States defaulting on its debt, Wall Street embraces risk management with a passion.

Right now, the Federal Reserve is preparing for the possibility of default if the August 2 deadline for raising the government’s $14.3 trillion borrowing limit is not met. All signs (and common sense sprinkled with a bit of optimism) point to President Barack Obama and Congress finding an agreement to increase the Treasury’s borrowing authority in time to avert a default. If not, the world’s biggest economy faces rating agency downgrades and runs out of cash — soon.

To prepare for that possibility, financial players are “taking steps to reduce the risk of holding Treasury bonds or angling for ways to make profits from any possible upheaval. And even if a deal is reached in Washington, some in the industry fear that the dickering has already harmed the country’s market credibility.”

The rating agencies, which control the fateful decision of whether the nation deserves to have its credit standing downgraded, are surveying other entities that would be affected by a United States default — like insurance companies and states — and issuing warnings that a United States downgrade could result in several other ratings cuts. States that might be downgraded, in turn, are trying to reassure the market that they could still pay their bills on time.

Some say bond traders are optimistic, however — thinking there’s no way the House Republicans will blow the August 2nd deadline. But just in case, they’ve got a plan.

Now that’s some Wall Street risk management.

Music Festivals: Almost Uninsurable

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Music festivals are a summer tradition. As winter melts away and temperatures rise, many music lovers begin planning their trips, whether it’s Coachella in California or Bonnaroo Music & Arts Festival in Tennessee, music festivals around the U.S. (and abroad) attract hundreds of thousands of people annually. But they also attract a frightening amount of risk.

Here are just a few of the more recent tragic events at music festivals:

  • At Bonnaroo this past June, a 24-year-old man died of hyperthermia, a condition that occurs when the body becomes too hot and can’t cool itself, and 32-year-old woman was found dead in her tent. The reason for her death was not released.
  • At Electric Daisy Festival, a weekend-long rave, one man died after ingesting drugs and running into traffic and another died of a suspected drug overdose at a area hospital. Approximately 30 were treated at hospitals in the Dallas area for drug, alcohol and heat related problems during and after the June 18 to 19 event.
  • At the West Virginia-based All Good Festival, which wrapped up just a few days ago, one woman was killed in the campgrounds after a pickup truck ran over her tent as she and two friends were sleeping.

And let’s not forget last year’s German music festival, The Love Parade, where 19 people were killed and 340 injured in a massive stampede. Apparently, concert organizers underestimated attendance by several hundred thousand.

So how are insurance companies prepared to handle the mammoth risk that music festivals present each year? Check out the June cover story of Risk Management for more on the topic.

Cyber Crime: Recent Events and Insuring Against It

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It seems like several times per day that I am sent a news alert of yet another data breach.

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The frequency with which they occur is frightening to say the least and unfortunately, many businesses are not covered for such an event.

Let’s take a look at data breaches that have occurred over the past week and what, if anything, can be done to prevent (or insure against) them.

  • A report by Wake Forest Baptist Medical Center to the state attorney general’s office explained that 357 people were affected by documents from an 11-year period taken from the medical center due to a security breach, the Winston-Salem Journal is reporting. Wake Forest Baptist issued a statement early last month that it had fired an employee, Linda Bowden Turner, who had taken medical records and documents from 1995 to 2006 from the medical center to her own properties.
  • If you used a credit or debit card at Margarita’s restaurant over the past three months, a virus might have culled your information before it could be encrypted and then sold to underground markets, Huntsville police said. At least 200 people over the past two weeks have reported incidents of stolen bank account information, and authorities said they suspect there are many more cases that have not been reported and many potential victims whose numbers have not yet been used by thieves.
  • Nearly 700 Toshiba customers’ emails and passwords have been stolen from the company’s U.S. servers, the latest company to be hit by hackers, although it doesn’t appear to be the work of the same groups that have infiltrated Arizona law enforcement, Orlando tourism or PBS. TechEYE.net reported that the hacker VOiD targeted Toshiba and claimed “to gain usernames and passwords on 450 of the company’s customers” as well as about 20 re-sellers and 12 administrators on the company’s Electronic Components and Semiconductors and Consumer Products sites.
  • Lady Gaga has called in police after thousands of her fans’ personal details were stolen from her website. Her record label acted after the site was hacked into by US cyber attackers SwagSec. A source said: “She’s upset and hopes police get to the bottom of how this was allowed to happen.” The group struck on June 27 but did not make the information, which included names and email addresses, public until this week.
  • Anonymous, a group of “hacktivist” computer-savvy attackers, has already speared a number of big fish: credit-card companies, the church of Scientology, and Monsanto, a biotechnology firm. And the hackers have flaunted their skills by successfully attacking computer-security expert firms, like HBGary. Its latest victim is Booz Allen Hamilton, a big consulting firm to America’s government, including on cybersecurity, with bigwigs like a former CIA head and a former director of national intelligence on its payroll.

So how do companies work to prevent or mitigate the effects or data breaches? One option is cyber liability insurance. Major insurers like Chartis, ACE and Hiscox have been in the cyber liability insurance game for several years now and smaller insurers are entering the market at a rapid pace. But what types of coverage does a cyber liability policy include? According to Dave Navetta, partner at InfoLawGroup and contributor to Fox News, the following may be included:

  • Breach Notice Costs. Coverage now exists for direct costs incurred by an insured to provide notice to individuals in the event of a security breach, as well as expenses to set up a call center and provide credit monitoring services. These costs involve a multiplier effect. For example, credit monitoring can cost anywhere from $10 to $200 per year, per person impacted by a breach. If one million individuals are at issue, costs could run in the millions of dollars. These costs also include attorney fees and forensic investigation expenses to determine the cause of a breach and whether notice is required under law.
  • Damages and Defense Costs. Provides coverage for information security and privacy breaches and technology professional liability. This element of the insurance plan is specifically designed to provide coverage for damages and defense costs arising out of lawsuits or claims resulting from a data security breach or an act, error or omission in the rendering of professional technology services (like data storage services). Some cyber policies will also protect your business against the cost of regulatory investigations or actions due to a security or privacy breach.
  • Service Provider Breach.With more companies outsourcing their data processing to third parties or the “cloud,” it is important that a cyber policy provides coverage if the security breach happens to one of the insured’s service providers. That will protect your company against many types of expenses. However, these policies are unlikely to provide any coverage for the personnel hours expended internally to address the breach.
  • Crisis Management, Business Interruption and Data Restoration. This insurance can also help cover the costs for getting the network back up and running and restoring lost data. Public relations services may also be included to help restore the company’s reputation.
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  • Denial-of-Service Attack. If your company or a service provider, such as a web host, is shut down by a denial-of-service attack or other type of hack, some insurance policies will cover lost income and the costs of repairing the network.
  • Cyber Extortion. In a case where a hacker decides to hijack your website, network or database, and demands money to restore it, a cyber extortion clause in an insurance policy can help to cover the settlement and the cost of hiring a security firm to track down the hacker.

Does your company have cyber liability insurance coverage?

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Soaring Temps Bring More Risks for Workers

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As the heat wave made its way from the southern U.S. to the northeast earlier this week, residents throughout that broad area struggled to find cool comfort. It’s easy to sit inside an air conidtioned office and watch the temperature rise on outdoor thermometers, but what about those that make their living working outside, often as hostages of heat? Many times, they’ll succumb to heat exhaustion at some point in their career, or worse, heat stroke.

According to the Occupational Safety and Health Administration (OSHA), thousands of outdoor workers experience some form of heat-related illness each year. Just this week, a 42-year-old Alabama man died of heat stroke two days after working outdoors and showing signs of heat exhaustion. And, according to the Alabama Department of Public Health, he was the third victim this year in the state. Triple-digit temperatures also recently claimed two lives in Texas and two in Oklahoma.

From Little Rock, Ark., to New York City, officials blamed more than three dozen deaths on sweltering temperatures. Heat advisories were in effect Wednesday in 11 states, including Georgia, with temperatures in Texas, Oklahoma and Kansas stuck well above the 100-degree mark.

So what can workers do (and employers encourage) to avoid succumbing to the effects of high temperatures? The American Society of Safety Engineers suggests the following:

  • Use cooling pads that can be inserted into hardhats or around the neck to keep the head and neck cool. Vented hardhats or neckbands soaked in cold water can also be used to minimize prolonged heat exposure and prevent the body from overheating.
  • Wear protective eyewear that features sufficient ventilation or anti-fog lens coating to reduce lens fogging from the heat. Sweatbands can also be used to prevent perspiration from dripping into the eyes.
  • Use gloves with leather palms and cotton or denim backs, which allow for an increased airglow and still protect hands. Also, choose gloves with a liner to absorb sweat preventing perspiration buildup. Some gloves also feature strips of nylon mesh or are perforated at the back of the hand for more airflow.
  • Wear light-colored, loose-fitting, breathable clothing such as cotton, recommends OSHA.
    Take breaks in cooler, shaded areas.
  • For workers exposed to extreme heat, proper hand protection from burns depends on the temperature and type of work to which workers are exposed.
  • To prevent dehydration, another hazard associated with exposure to heat, NIOSH recommends that workers drink five to seven ounces of fluids every 15 to 20 minutes. Drink cool water and avoid diuretics such as coffee, tea, alcohol or soda that actually deplete body fluid. Sports drinks are also good for replacing fluid in the body but use should be monitored due to the high sodium content.

Following these, and other tips, is just good risk management and illness prevention. For further information about protecting workers from the effects of heat, visit OSHA’s fact sheet on the topic.