The PwC Insurance Banana Skins 2021 survey shows that cybercrime is ranked as the number one risk by carriers globally, while climate change tops the list for reinsurers amid a rise in natural catastrophe events.
The latest global edition of the biennial survey includes responses from more than 600 industry leaders and executives in 47 territories, and shows that climate change has become a top concern for life, non-life, reinsurance and composite insurers.
In fact, climate change has moved into the top five for the first time and is the biggest riser in this year’s survey, having been in sixth place in the 2019 edition.
For reinsurers specifically, climate change, and particularly catastrophe risks, ranked as the top risk facing the industry, which reflects a notable rise in losses from secondary perils and catastrophe events in general.
“It’s clear from our biennial survey that the impact of climate change is now seen as a far nearer-term risk to insurers and reinsurers than previously considered. The industry is also gravely concerned that the wider implications of climate change are difficult or impossible to predict,” said Arthur Wightman, PwC Bermuda leader and Insurance leader.
“This week’s COP26 discussions are an opportunity for the insurance industry to highlight the unique and critical role it can play in bringing its expertise and resources to help address the formidable challenge of climate change and help the world go faster to net zero,” he added.
Also in the reinsurance edition of the survey, Bermuda reinsurance market respondents are more concerned than average about operating risks and the public environment, while economic risks are viewed as more manageable.
Bermuda market respondents are also less concerned about interest rates and investment performance, with one response noting that, “Low investment return hampers insurance company returns, but should not cause permanent harm.”
After climate change, reinsurers view regulation as the next biggest risk, followed by cybercrime in third. The top five is completed by technology in fourth place and then human talent in fifth.
Turning back to the global edition of the survey, climate change was the strongest mover but still came in behind technology in third place, regulation in second place, and then crime, particularly cybercrime at the summit.
Cybercrime has been a rising feature for several years, but this is the first time that it’s taken the number one spot, after coming in second to technology in 2019.
“As organisations introduce cloud-computing and new digital solutions with the increase in virtual working, the challenge for insurers has become more complex than ever. The rise in the risk posed by cybercrime reflects concern about both the vulnerability of insurers’ systems to cyber attacks, and the costs of underwriting cyber insurance.
“Of significant concern is that insurers may be underestimating the potential costs of cybercrime when writing policies,” said Matt Britten, risk assurance partner, PwC Bermuda.
