Assurant 2011 Annual Report Download - page 27

ASSURANT, INC.2011 Form10-K 19
PARTI
ITEM 1A Risk Factors
 e failure to eff ectively maintain and modernize our
information systems could adversely aff ect our business.
Our business is dependent upon our ability to maintain the e ectiveness
of existing technology systems, enhance technology to support the
Company’s business in an e cient and cost-e ective manner, and keep
current with technological advances, evolving industry and regulatory
standards and customer needs. In addition, our ability to keep our
systems integrated with those of our clients is critical to the success of
our business. If we do not e ectively maintain our systems and update
them to address technological advancements, our relationships and
ability to do business with our clients may be adversely a ected. We
could also experience other adverse consequences, including unfavorable
underwriting and reserving decisions, internal control de ciencies and
security breaches resulting in loss of data. System development projects
may be more costly or time-consuming than anticipated and may not
deliver the expected bene ts upon completion.
Failure to successfully manage outsourcing activities
could adversely aff ect our business.
As we seek to improve operating e ciencies across the business, we
have outsourced and may outsource selected functions to third parties.
We take steps to monitor and regulate the performance of these
independent third parties to whom the Company has outsourced
these functions. If these third parties fail to satisfy their obligations
to the Company as a result of their performance, changes in their
operations,  nancial condition or other matters beyond our control, the
Company’s operations, information, service standards and data could
be compromised. In addition, to the extent the Company outsources
selected services or functions to third parties outside the UnitedStates,
the Company is exposed to the risks that accompany operations in a
foreign jurisdiction, including international economic and political
conditions, foreign laws and  uctuations in currency values. If third
party providers do not perform as anticipated, we may not fully realize
the anticipated economic and other bene ts of these outsourcing
projects, which could adversely a ect our results of operations and
 nancial condition.
System security risks, data protection breaches
and cyber-attacks could adversely aff ect our business
and results of operations.
Our information technology systems are vulnerable to threats from
computer viruses, natural disasters, unauthorized access, cyber
attack and other similar disruptions. Although we have network
security measures in place, experienced computer programmers and
hackers may be able to penetrate our network and misappropriate
or compromise con dential information, create system disruptions
or cause shutdowns.
As an insurer, we receive and are required to protect con dential
information from customers, vendors and other third parties that may
include personal health or  nancial information. To the extent any
disruption or security breach results in a loss or damage to our data,
or inappropriate disclosure of our con dential information or that of
others, it could cause signi cant damage to our reputation, a ect our
relationships with our customers and clients, lead to claims against
the Company, result in regulatory action and ultimately harm our
business. In addition, we may be required to incur signi cant costs
to mitigate the damage caused by any security breach, or to protect
against future damage.
We may be unable to accurately price for benefi ts,
claims and other costs, which could reduce our
profi tability.
Our pro tability could vary depending on our ability to predict
and price for bene ts, claims and other costs including, but not
limited to, medical and dental costs and the frequency and severity
of property claims.  is ability could be a ected by factors such as
in ation, changes in the regulatory environment, changes in industry
practices, changes in legal, social or environmental conditions, or new
technologies.  e inability to accurately price for bene ts, claims and
other costs could materially adversely a ect our results of operations
and  nancial condition.
Reinsurance may not be available or adequate to protect
us against losses, and we are subject to the credit risk
of reinsurers.
As part of our overall risk and capacity management strategy, we
purchase reinsurance for certain risks underwritten by our various
operating segments. Although the reinsurer is liable to us for claims
properly ceded under the reinsurance arrangements, we remain liable
to the insured as the direct insurer on all risks reinsured. Ceded
reinsurance arrangements therefore do not eliminate our obligation to
pay claims. We are subject to credit risk with respect to our ability to
recover amounts due from reinsurers.  e inability to collect amounts
due from reinsurers could materially adversely a ect our results of
operations and our  nancial condition.
Reinsurance for certain types of catastrophes could become unavailable
or prohibitively expensive for some of our businesses. In such a situation,
we might also be adversely a ected by state regulations that prohibit
us from excluding catastrophe exposures or from withdrawing from
or increasing premium rates in catastrophe-prone areas.
Our reinsurance facilities are generally subject to annual renewal. We
may not be able to maintain our current reinsurance facilities and,
even where highly desirable or necessary, we may not be able to obtain
other reinsurance facilities in adequate amounts and at favorable rates.
Inability to obtain reinsurance at favorable rates or at all could cause us
to reduce the level of our underwriting commitments, to take more risk,
or to incur higher costs.  ese developments could materially adversely
a ect our results of operations and  nancial condition.
We have sold businesses through reinsurance that could
again become our direct fi nancial and administrative
responsibility if the purchasing companies were
to become insolvent.
In the past, we have sold, and in the future we may sell, businesses
through reinsurance ceded to third parties. For example, in 2001 we
sold the insurance operations of our Fortis Financial Group (“FFG”)
division to  e Hartford Financial Services Group,Inc. (“ e Hartford”)
and in 2000 we sold our Long Term Care (“LTC”) division to John
Hancock Life Insurance Company (“John Hancock”), now a subsidiary