Category Archives: Political Risk

Q&A: Resiliency in India

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The 2018 Lloyd’s City Risk Index was analyzed during the RIMS Risk Forum India in Mumbai, and it notes a possible turning point for the subcontinent’s cities regarding resiliency. In short, Indian cities were rated as weak, but recent government and public investments and campaigns that focus on strengthening infrastructures and people may strengthen those assessments.

During a November 14 morning session, “Assessing the Impact of Natural and Man-made Threats on India’s Economy,” Shankar Garigiparthy, country manager and CEO of Lloyd’s India discussed how much economic output (GDP) cities in India could lose annually as a consequence of various types of rare risk events – such as the Kerala floods this past July – or from more frequently occurring events such as cyberattacks.

He discussed with Risk Management Monitor reasons why he is hopeful for a resiliency turnaround in India and how the combined wills of the government, media, public and business can strengthen the country’s infrastructures and ultimately, its risk ratings.

RMM: How do India’s cities rank in Lloyd’s City Risk Index?

SG: Lloyd’s City Risk Index was published three months ago and we researched 279 cities. We found that a vast majority of cities within the subcontinent of India have been rated as very weak from a resilience point of view. They are at high risk for flood, geopolitical security, market crash, just to name a few.

RMM: What steps are being taken to improve the collective resiliency?

SG: What we have seen in last three or four years is a significant level of investment from the government in terms of building infrastructure. It’s been in the form of roads, bridges, railways, ports, and airports, there has been a significant level of investment. And it seems there is more to come. In the budget, the government has announced more – which is encouraging to see from an infrastructure-building point of view.

However, where we still see a bit of lack is in the area of insurance penetration in the country. That’s where I think insurance companies can be a useful partner and tool to mitigate some of the level of these risks.

RMM: Could this be a chance for insurers to get in on the ground floor of India’s improvement projects?

SG: Yes.

RMM: What incidents have influenced the government to act?

SG: The Chennai floods [in 2015] and the floods in Kerala [in July]. That was a once-in-a-hundred-years occurrence. The entire state was flooded, which I think was the first of its kind. It was completely underwater.

Similarly, the Chennai floods marked another major event. Since then, monsoon has happened but the level of flooding has been managed pretty well.

In the session, we examined the Mumbai floods in 2005. And even last year, there was flooding here for a day, but within a day the water receded pretty quickly and was pumped out. The machinery kicked in and we were able to get out of it pretty well.

RMM: What led to that success?

SG: It was a combination of low tide and the government investing in the necessary pumping mechanisms to actually pump the water back into the sea, and unclog some of the stormwater drains as well. Steps are being taken, slowly but steadily.

RMM: What other institutions are taking measures to build resiliency?

SG: There are a few companies [which I won’t name] that are leading the way and it is encouraging to see that.

The media is also equally playing a fairly significant role as well. That’s also helping because public awareness is something that is critical. The media is raising awareness in terms of the importance of protecting your infrastructure and environment and the need for trees and planting.

RMM: Would you agree that the will to change and improve existing infrastructures is as important as the funding?

SG: I think it’s all there. The government has shown willingness to improve infrastructure. The people have demanded it, so there is a push and a pull coming from both sides. And we are seeing that development happen. Compared to where we were five or ten years ago and where we are now, there’s been a massive change.

There is still more that can be done. I’m not saying that we’re there yet. But it’s not an easy thing, as well.

Given India’s geography and how the political scenario is within the country, we will always be exposed to natural catastrophes. Flooding is going to be a constant phenomenon for us.

There is investment being done but it’s patchy. In some states there has been fantastic infrastructure investment and in others, less so. I think that has got to be addressed and that’s where the public [should be] demanding more actions there, where infrastructure investment has not been up to the mark.

RIMS Legislative Summit Focuses on NFIP Renewal

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WASHINGTON, D.C.—The menacing presence of Hurricane Florence turned the focus at the RIMS Legislative Summit to the National Flood Insurance Program (NFIP), an ever-important issue for business owners across the country.

The NFIP has been extended several times since September 2017 and the next deadline to reauthorize the program is Nov. 30. The summit’s timing was especially relevant as Hurricane Florence approached the Eastern Seaboard just 300 miles south of the summit, expected to make landfall on Friday.

An Industry Perspective of Federal Legislative Issues
Moderated by Whitney Craig, RIMS director of government relations, a panel discussion, “NFIP & Beyond” featured insight from Jennifer Webb, counsel for the Independent Insurance Agents and Brokers of America, and Joel Wood and Blaire Bartlett of the Council of Insurance Agents & Brokers and its CouncilPAC.

The panelists came to a consensus that a reauthorized NFIP was critical, and that upcoming midterm elections would influence the amount of time an extension would be granted. They acknowledged that a gap in coverage is certainly not ideal and said their offices are working on a bi-partisan resolution.

Bartlett said that improving NFIP through privatization will be a give-and-take process.

“To its credit, FEMA has done what it is able to do as far as claims processing goes. They have taken a multiyear look. If you want to open up the private markets, that will have to be balanced with some claims legislation—we’re going to have to give in some on claims language,” Bartlett said, noting that, “If Hurricane Florence does hit the Carolinas, some of the members may not be willing to call out the federal government the way New Yorkers did after Hurricane Sandy in 2012.”

And while there were some civil disagreements, the trio did find some common ground. For example, FEMA’s flood maps were rebuked for failing when put to the test by a real flood as seen in Houston in 2017 following Hurricane Harvey.

“I think we can agree that NFIP needs some modernizations, but there’s a way to do that without closing down a program that is being used by 5 million people,” Webb said.  “We didn’t see that in Texas but we could see it in the Carolinas.”

Congressional Staff Panel
This panel featured two senior congressional staffers for the U.S. House of Representatives – John Y. Hair, financial services committee designee for Congressman John Duffy (R-WI); and Lucas West, legislative director for Congressman Blaine Luetkemeyer (R-MO).

Discussions largely centered on NFIP reauthorization, Hurricane Florence and the upcoming elections.

“We have just over two months to get it through before the expiration and it’s really on the Senate. We’re putting pressure on the Senate for a long-term, five-year bill that actually makes some reforms,” Hair said.

Also discussed was the Terrorism Risk Insurance Act (TRIA), which created a temporary federal program that provides public and private compensation due to terrorism-related losses, which is set to expire in December 2020. And while the traditional issues of insurance were discussed, cybersecurity, data breaches and even autonomous vehicles were also included.

Regarding autonomous vehicles, Hair said, “Certainly, access to data is going to be important on decisions regarding ‘who’s going to take the liability [in the event of a crash]?’ This could lead to a huge push to reform our liability system. We’re engaging in the risk of [commercial and taxi driver] licenses right now.”

Midterm Election: Insider Update
Mike Gula, co-founder of Gula Graham, the largest Republican fundraising firm in the U.S., discussed how attendees, members and their companies can strategically position themselves with upcoming midterm elections in November.

Gula said that because dozens of congressional seats are up for grabs in the election, companies and insurers may need to prepare for changes to laws that will impact their policies and coverage.

On day two of the summit, dozens of RIMS members descended on Capitol Hill for meetings with congressional leaders. The goal was to share RIMS priorities for a long-term, reauthorized NFIP via H.R. 2874, the 21st Century Flood Reform Act, and funding for non-regulatory maps that project future flood risks. Later, in the Rayburn House Office Building, Florida Congressman Dennis Ross spoke to RIMS members and echoed their sentiments about NFIP and how flood maps were in desperate need of a thorough update.

Access RIMScast coverage of the summit.

Traveling? It’s No Time To Protest

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Traveling for business to a foreign country has its assumed risks.

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Typical details like language barriers and exchange rates can be daunting enough, but businesses should be mindful of the potential effects of a protest or demonstration near their employees’ hotels or destinations.

It is easy to imagine attending a conference in another country where a protest is occurring right in front of your conference center. While many are peaceful, some can become violent and there may be legal issues to consider as well.

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Regardless of whether it is related to your visit, the experience can be confusing and unnerving.

Businesses must consider how to prevent their employees from getting stuck in the wrong place at the wrong time; in addition to the disorientation, there can be severe repercussions for being even seemingly involved in a foreign demonstration. Laws and protocols about protests vary from country to country, and guilt—even by association—can have disastrous consequences.

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To ensure your employees know how to successfully circumvent a demonstration, check out the infographic below by On Call International, which gives advice on how visitors should conduct themselves and stay safe in the event of a protest—particularly a violent one.

Reputational Crisis Forces Cambridge Analytica’s Closure

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Most of us are aware of the recent scandal involving Facebook and political consulting firm Cambridge Analytica, wherein the latter company obtained data from up to 87 million Facebook users and, in turn, built profiles of individual voters and their political preferences to best target advertising and sway voter sentiment. This information was used to enable Donald Trump’s campaign in the 2016 presidential election.

Right around that time it was reported that the Cambridge Analytica board of directors suspended CEO Alexander Nix. This action was taken after a whistleblower claimed Nix set up a “fake office” in Cambridge to present a more academic side to the company, and made comments to undercover reporters  that “do not represent the values or operations of the firm and his suspension reflects the seriousness with which we view this violation.”

A feature about the scandal in Risk Management’s current issue explains why the incident was not a data breach and how companies can learn from this and comply with EU’s General Data Protection Regulation (GDPR) in time for its May 25 implementation.

In the aftermath of the scandal and Cambridge Analytica’s concession that it will not be able to recover from its reputational crisis—although the company’s leadership maintains that it acted ethically—the UK-based firm and its affiliates announced on May 2 that it will be “ceasing all operations.” Excerpts from its statement are below:

Over the past several months, Cambridge Analytica has been the subject of numerous unfounded accusations and, despite the Company’s efforts to correct the record, has been vilified for activities that are not only legal, but also widely accepted as a standard component of online advertising in both the political and commercial arenas.    

Despite Cambridge Analytica’s unwavering confidence that its employees have acted ethically and lawfully, which view is now fully supported by [Queen’s Counsel Julian Malins] report, the siege of media coverage has driven away virtually all of the Company’s customers and suppliers. As a result, it has been determined that it is no longer viable to continue operating the business, which left Cambridge Analytica with no realistic alternative to placing the Company into administration.

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This once again demonstrates how attacks in the court of public opinion can cripple a business.

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Despite a fast reaction and being exonerated by a credible authority, no amount of crisis management and communication could make up for the actions of Cambridge Analytica’s leadership. It also seems that the company had not considered a business continuity plan for a reputation crisis of this magnitude.

Last year, Steel City Re CEO Nir Kossovsky wrote for Risk Management Monitor about reputational risk—reflecting on it and warning of the consequences to an organization. When public anger rises, he said, “more blame is being cast upon recognizable targets, such as CEOs.”

And while Facebook CEO Mark Zuckerberg seems to have dodged the bullets fired his way during a Congressional hearing last month (did you #deletefacebook?), Cambridge Analytica’s leadership knew that, based on its actions and the cavalcade of accusations, neither their clients nor the public would ever “like” them again.

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