The annual SONAR report from Swiss Re Institute highlights new technology, the spread of 5G, limits to central banking tinkering, the growth of genetic testing and the impacts of climate change on public health as emerging risks that insurers and reinsurers need to have on their radar.
The latest SONAR report from the global reinsurance firm looks at emerging risk themes and trends that the insurance and reinsurance sector needs to be mindful of. The reinsurer notes that the risks identified in its report are relevant to both life and non-life markets, asset management and also operations and insurance market conditions.
The report explores a range of risks in detail, but highlights five risks that have high potential impact on the re/insurance industry.
This includes the rise of new technology and specifically the fact that much of the hardware in areas of critical infrastructure is often outdated, which, drives significant accumulation risk for insurers as well as the potential for unexpected losses related to property damage, bodily injury, BI, and cyber threats.
Continued advancements in technology has also led to the impending spread of 5G tech, which will enable wireless connectivity in real time for any device of the Internet of Things (IoT), such as autonomous cars. For insurers, there are concerns are the impacts of potential negative health effects from electromagnetic fields, as well as the fact hackers can leverage 5G to essentially steel data much faster. “Major concerns are possible privacy and security breaches, as well as espionage,” says the report.
Swiss Re Institute also highlights concern that another economic downturn will require a fiscal response, adding that the re/insurance sector could benefit if policy changes drive growth and financial stability. At the same time, growing uncertainty and increased financial market volatility remain potential risk factors.
Genetic testing is another top, emerging risk the sector needs to be aware of, as the cost of this has reduced dramatically in recent times leading to broader use by both public health systems and individuals. The report says that this has “significant implications for life insurers, both in regard to data management and regulatory constraints.”
Moving away from technological advances, and the report highlights climate change and its impact on public health as a top emerging risk. Heatwaves, droughts, flooding, wildfires, and vector-borne diseases are among the most significant risks from climate change affecting human health.
“Swiss Re and the insurance industry at large first flagged climate change as an emerging risk many decades ago. The risk has now ’emerged’ but associated and challenging uncertainties still remain, such as the implications on Life & Health insurance,” said Patrick Raaflaub, Swiss Re’s Group Chief Risk Officer.
