11. The Future

Over the past decade, the capture of detailed portfolio information and active use of sophisticated catastrophe risk management tools has become standard operating procedure for all property and casualty writers exposed to catastrophe risk.These actions allow insurers to survive the threat of extreme catastrophic events, and thrive in an atmosphere where knowledge provides a competitive advantage.

The life and health industry can benefit from the lessons learned by the property and casualty industry in the 1990s. By providing an improved understanding of the magnitude, likelihood, and location of risk, investments in systems for data capture and risk quantification will readily pay dividends in the form of improved risk management decision-making.

The issue of catastrophe risk to the life and health industry has further ramifications. Increasing numbers of insurance companies are creating the role of chief risk officer whose responsibilities include the quantification of total catastrophe risk. A key lesson learned from the WTC disaster is that in extreme events there is a significant correlation across lines of business. For insurers that write multiple lines---property and casualty, life and health, or both---the chief risk officer needs to consider the aggregate catastrophe risk in order to completely understand the risk faced across the enterprise.

Individuals are limited in their capacity to prevent or mitigate catastrophes. Whether natural or man-made, the effects on the population can be disastrous. Insurers play an important role in making the financial consequences of inevitable injuries and fatalities more bearable. Only future experience will reveal the full dangers posed by events of unprecedented magnitude or unexpected origin.To act now, science and technology offer the best tools to manage risk and understand the relationship between catastrophe, injury, and insurance.

Figure 11.1 The risk of mass casualty events can be managed with preparation and planning_U.S. First Responders in preparedness training, Seattle,May 2003 (Image: Associated Press)