The most recent version of Swiss Re's SONAR report is out, with a discussion of the top 21 emerging risks for the re/insurance industry in the next 5-10 years. Not all of them are new or even emerging, but they are what the insurance industry is looking down the barrel of. Some of them may change the industry forever.
These include climate change and increasing life expectancies, but extend to the advent of the sharing economy, which is transforming just about everything, but is thus far completely untested under duress.
The top three include the emerging-market crisis, the great monetary experiment, and internet availability and use within countries, however other risks include human-induced earthquakes and mass migration.
The SONAR process is one developed by Swiss Re, using crowdsourcing to pick up early signs of what may be to come. The report goes through the risks facing the risk industry - newly developing or evolving risks that haven't been fully realised, and may never be, but must be discussed nonetheless.
The top three risks with the highest impact potential
Emerging Markets Crisis 2.0
Emerging countries are tumultuous, which can slow market entry and certain penetration strategies of global insurers. This can result in high underwriting losses, particularly in property, the personal, and communication lines.
The Great Monetary Experiment
Negative interest rates and unconventional monetary policy costs over the long-term are still unknown, but could result in a broader loss of confidence in the monetary system. Short-term benefits are likely to be limited, the report states, since the policies are unlikely to boost economic growth.
Disconnected internets may soon be a reality as firewalls, filtering software and isolated IT infrastructure that is detached from global networks become more commonplace. The issues here regard increased costs and interferences with business models that cross borders.
- The sharing economy
- Fintech risks
- Crisis of trust
- Human-induced earthquakes
- Blockchain risks
- Distributed energy generation
- Gene drives
- Phoney data
- Precision medicine
- The future of work
- Digital identities
- Mass migration
- Ocean pollution from microplastics
- Viral leaderless mobilisation
- Seabed mining
"Risk management is not just about managing risks in the present. It is about anticipating future ones to make sure we will be in a position to deal with them," says Patrick Raaflaub, Swiss Re's group chief risk officer.
"These risks may only fully reveal themselves to future generations. That doesn't mean that we shouldn't act today to reduce uncertainty and alleviate their burden."