The identified risks are relevant to life and non-life insurance areas, asset management as well as operations and insurance market conditions. They are presented with the goal of helping industry players prepare for new scenarios by adapting their behaviour, market conduct and product portfolios.
The five risks with high potential impact on the industry are:
Teaching an old dog new tricks: New technologies meet ageing infrastructure
Technological improvements are ongoing. Hardware in areas of critical infrastructure, including smart electric power grids or pipelines and hospitals, however, is often outdated. As a consequence, insurers face higher risk accumulation and unexpected loss potential in the areas of property damage, bodily injury, business interruption and cyber risk.
Off the leash: The spread of 5G technology
5G will enable wireless connectivity in real time for any device of the internet of things (IoT), such as autonomous cars or sensor-steered factories. Current concerns regarding potential negative health effects from electromagnetic fields are likely to increase. In addition, hackers can also exploit 5G speed and volume to acquire (or steal) more data faster. Major concerns are possible privacy and security breaches, as well as espionage.
Limits to central bank tinkering
There is a growing consensus that another economic downturn will need a fiscal response. The re/insurance industry could benefit if changes to policy bring growth and financial stability. However, a rise in uncertainty, causing higher financial market volatility and declines in asset valuations, is a potential risk factor.
Don't ask, don’t tell: The growth of genetic testing
Over the past years, the cost of genetic testing has declined significantly and with direct-to-consumer (DTC) testing kits, genetic tests are now increasingly available and affordable for individual use. They have been widely adopted by public health systems and individuals. This has significant implications for life insurers, both in regard to data management and regulatory constraints.
It's existential: Climate change and public health
The most pronounced risks from climate change affecting human health stem from heatwaves, floods, droughts, fires and vector-borne diseases. Millions of lives and healthcare services could be at risk. Without action, mortality rates and healthcare costs could soar, with significant consequences for the health, workers' compensation and life insurance lines of business.
"Swiss Re and the insurance industry at large first flagged climate change as an emerging risk many decades ago", says Patrick Raaflaub, Swiss Re's Group Chief Risk Officer. "The risk has now 'emerged' but associated and challenging uncertainties still remain, such as the implications on Life & Health insurance," Raaflaub adds.
The report offers insights into emerging risks and highlights a number of emerging trend spotlights. Emerging risks are newly developing or evolving risks that are difficult to quantify, but potentially have a significant impact on the industry and society. Emerging trend spotlights examine early development, which may offer both opportunities and risks for the insurance industry in the future. The report is distributed among clients and the wider stakeholder community in order to inform the debate about emerging risks and facilitate the finding of solutions.