top 10 risks to insurance industry in pakistan

8/9/2019 Top 10 Risks to Insurance Industry in Pakistan

1/4

HAILEY COLLEGE OF BANKING AND FINANCE

Risk Management

Top 10 risks to Insurance Industry inPakistan

Presented by: XYZ Roll no: 123

5/19/2010

1Presented to: ABC


2/4

Top 10 risks to Insurance Industry in

Pakistan

Recent headlines have been dominated by catastrophic eventsearthquakes in Iran, devastating

fires in the United States, floods in Europe, flu epidemics in Asia and attacks by computer

viruses. And who can overlook the recent terrorist mayhem in Spain?

What are the greatest risks that we face as a nation? Thats too broad a question to answer in one

issue. It is narrowed down here as follow:

First we decided to look at only risks triggered by an event, natural or manmade. In retrospect,

asbestos contamination has turned out to be among the most costly risks ever, but its tough to

identify an asbestos event.

Second, the event had to have a reasonable chance of happening. We settled on an event with a

probability of happening of once in a hundred years. Its not an asteroid destroying the entireEast Coast. But it is a Category Four hurricane slamming into Miami.

1. TERRORISM: Alike as to other countries of the world, in Pakistan as well Terroristattacks have increasingly focused on economic and civilian targets, making the centralbusiness districts of major cities likely locations for an attack. Other types of attackscould cause other types of losses to commerce attacks in previous history have

happened with bombs, suicidal bombs, n terrorist attacks. Now there has been a growing

concern that the next attack could in value the use of chemical biological, radiological ornuclear weapons.

2. INDUSTRIAL ACCIDENTS: Fire was spread in the paint factory of Karachi thelargest city of Pakistan from some reason. And in the past few years many industrial fireshave took place. Worldwide, however, the most deadly industrial accident occurred in

Bhopal, India, on December 2, 1984, when a toxic cloud of methyl isocyanate, wasreleased from a Union Carbide plant and rolled into a highly populated shantytown in thevalley below, killing more than 3,000 people. The industries with more higher risk are

mining and oil and gas extraction. It is in these industries where there is the greatest

potential for major incidents. In Pakistan the salt. Coal and gas extraction industries are

with greatest risk.


3/4

3. EARTH QUAKE: Previously a massive earthquake struck Pakistan and parts ofIndia and Afghanistan as well on the morning of 8th October 2005. This was the strongest

earthquake in the area in the last hundred years. About 80000 people were killed andaround 50000 were injured.Despite intensive preparations and contingency planning, risk

managers typically list earthquakes among their concerns.Besides the obvious concern

about the performance of their own facilities, risk managers understand that the recoveryof their businesses is also highly dependent on the survival of the transportation network,the utilities and communication systems.

4. CYBER ATTACK: Very large losses could also occur from an attack on onlinerevenue systems, as companies with retail revenues increase the amount of business they

generate through online channels. Unless security increases proportionally, infected

networks could mean a drop in transaction volume and cost businesses billions of dollars

in sales and profits. Without a doubt, computer viruses are a serious threat to all forms ofmodern business activities. Targeted attacks could cause companies extreme losses and

the most severe scenarios (of extremely low probability) envision the destabilization of

entire business sectors. In the worst-case scenarios, cyberattacks cause physicaldamage or major and lengthy failures of the infrastructures considered vital to support

business, government and daily life.

5. PANDEMIC: Pandemic is an epidemic ofinfectious disease that is spreading throughhuman populations across a large region; for instance a continent, or even worldwide. A

widespread endemic disease that is stable in terms of how many people are getting sickfrom it is not a pandemic. Further, flu pandemics exclude seasonal flu, unless the flu of

the season is a pandemic. Throughout history there have been a number of pandemics,

such as smallpox and tuberculosis. More recent pandemics include the HIVpandemicand the 2009 flu pandemic. This pandemic scenario would have enormous economic lossimplications: direct health costs, indirect economic loss resulting from the loss of

productivity of those who fall ill, and lost future earnings of those who die. Replacing the

dead in the workforce might add another few billion dollars to the economic loss.

6. CREDIT CRUNCH: The credit crunch and its after shocks pose existential threatsto leading global firms in asset management, real estate, insurance and banking, whilecapital-intensive sectors such as life sciences and powers and utilities are under pressure

from a tighter credit environment.

7. REGULATION AND COMPLIANCE: The risk may not have such a obviousimpact, but regulatory risks continue to be keenly felt at leading firms in sectors such as

life sciences, telecoms, oil and gas and power utilities. Furthermore, uncertaintyregarding the regulatory response to the global financial crises has caused this risk to

become more important in asset management, banking and insurance.
http://en.wikipedia.org/wiki/Epidemichttp://en.wikipedia.org/wiki/Infectious_diseasehttp://en.wikipedia.org/wiki/Continenthttp://en.wikipedia.org/wiki/Influenza_pandemichttp://en.wikipedia.org/wiki/Seasonal_fluhttp://en.wikipedia.org/wiki/Smallpoxhttp://en.wikipedia.org/wiki/Tuberculosishttp://en.wikipedia.org/wiki/HIVhttp://en.wikipedia.org/wiki/2009_flu_pandemichttp://en.wikipedia.org/wiki/Epidemichttp://en.wikipedia.org/wiki/Infectious_diseasehttp://en.wikipedia.org/wiki/Continenthttp://en.wikipedia.org/wiki/Influenza_pandemichttp://en.wikipedia.org/wiki/Seasonal_fluhttp://en.wikipedia.org/wiki/Smallpoxhttp://en.wikipedia.org/wiki/Tuberculosishttp://en.wikipedia.org/wiki/HIVhttp://en.wikipedia.org/wiki/2009_flu_pandemic


4/4

8. NON TRADITIONAL ENTRANTS:New competitors are emerging fromadjacent markets and distinct geographies. National companies in Pakistan such as of gas,

coal, banking, insurance and asset management companies now compete for the samecustomers as do internet, telecom and media companies and emerging market companies

are more competitive in the automotive sector.

9. REPUTATION RISK:Reputational risk, often called reputation risk, is a type ofrisk related to the trustworthiness of business. Damage to a firm's reputation can result in

lost revenue or destruction ofshareholder value, even if the company is not found guiltyof a crime. Extreme cases may even lead tobankruptcy (As in the case ofArthur

Andersen). Recent examples of companies include: Toyota, Goldman Sachs, and BP.Not

only the reputations of firms but those of entire industries are increasingly under threat.Environmental and climate concerns threaten oil and gas utility companies, pressure to

provide wider access to life-saving drugs threaten funding for innovation in life sciences

and the credit crunch is weakening the public trust in banking and asset management

companies.

10. INTELLECTUAL RISK: Insurance is a new concept in Pakistan thereforequalified persons in this sector is few. New companies need experienced and qualified

staff. There is a risk that they might be hired by other companies. The insurance industryfaces that risk but it can be minimized by attractive salary packages and other incentives.
http://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Shareholder_valuehttp://en.wikipedia.org/wiki/Bankruptcyhttp://en.wikipedia.org/wiki/Arthur_Andersenhttp://en.wikipedia.org/wiki/Arthur_Andersenhttp://en.wikipedia.org/wiki/Toyotahttp://en.wikipedia.org/wiki/Goldman_Sachshttp://en.wikipedia.org/wiki/BPhttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Shareholder_valuehttp://en.wikipedia.org/wiki/Bankruptcyhttp://en.wikipedia.org/wiki/Arthur_Andersenhttp://en.wikipedia.org/wiki/Arthur_Andersenhttp://en.wikipedia.org/wiki/Toyotahttp://en.wikipedia.org/wiki/Goldman_Sachshttp://en.wikipedia.org/wiki/BP

top 10 risks to insurance industry in pakistan

Documents