Assurant 2015 Annual Report Download - page 34

ASSURANT, INC. – 2015 Form 10-K22
PART I
ITEM 1A Risk Factors
Failure to protect our clients’ condential
information and privacy could harm our
reputation, cause us to lose customers,
reduce our protability and subject us to
nes, litigation and penalties, and the costs
of compliance with privacy and security laws
could adversely affect our business.
Our businesses are subject to a variety of privacy regulations
and condentiality obligations. If we do not comply with
state and federal privacy and security laws and regulations,
or contractual provisions, requiring us to protect condential
information and provide notice to individuals whose
information is improperly disclosed, we could experience
adverse consequences, including loss of customers and related
revenue, regulatory problems (including nes and penalties),
harm to our reputation and civil litigation, which could
adversely affect our business and results of operations. As
have other entities in the insurance industry, we have incurred
and will continue to incur substantial costs in complying with
the requirements of applicable privacy and security laws.
For more information on the privacy and security laws that
apply to us, please see Item 1, “Business — Regulation.”
The failure to effectively maintain and
modernize our information systems could
adversely affect our business.
Our business is dependent upon our ability to maintain
the effectiveness of existing technology systems, enhance
technology to support the Company’s business in an efcient
and cost-effective 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 effectively maintain our systems
and update them to address technological advancements,
our relationships and ability to do business with our clients
may be adversely affected. 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 affect our business.
As we continue to improve operating efciencies across the
business, we have outsourced and may outsource selected
functions to third parties, including independent contractors�
For example, we outsource certain key functions in our Mortgage
Solutions businesses to certain independent contractors who
we believe offer us expertise in this area, as well as scalability
and cost effective services. 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,
reputation and data could be compromised. In particular, if
we are unable to attract and retain the necessary quality and
number of contracts with enough independent contractors, or
if changes in law or judicial decisions require such independent
contractors to be classied as employees, our Mortgage
Solutions businesses could be signicantly adversely affected.
In addition, to the extent the Company outsources selected
services or functions to third parties outside the U.S., 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 and, potentially, increased risk of data
breaches. For more information on the risks associated with
outsourcing to international third parties, please see Item 1A,
“Risk Factors — Risks Related to Our Company — We face
risks associated with our international operations.” If third
party providers do not perform as anticipated, we may not
fully realize the anticipated economic and other benets of
this outsourcing, which could adversely affect our results of
operations and nancial condition.
System security risks, data protection breaches
and cyber-attacks could adversely affect 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. If
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 damage to our reputation,
affect our relationships with our customers and clients, lead
to claims against the Company, result in regulatory action
and 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�
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. The inability to collect
amounts due from reinsurers could materially adversely
affect our results of operations and our nancial condition.