Addressing the emerging risks of 2024
Addressing the emerging risks of 2024 | Insurance Business America
Risk Management News
Addressing the emerging risks of 2024
RGA’s global chief risk officer on what is on the horizon for the future of insurance
Risk Management News
By
Kenneth Araullo
The insurance sector, foundational in its role to mitigate risk through the pooling and redistribution of risk, faces a transformative challenge as the nature of risk evolves amidst a rapidly changing cultural, geopolitical, and environmental landscape.
Jonathan Porter (pictured above), Reinsurance Group of America’s (RGA) global chief risk officer, outlines how a report from the Geneva Association underscores the need for the insurance industry to adapt its traditional business models to remain in step with these changes.
Recent global events, including the COVID-19 pandemic, conflicts in Ukraine and Israel, unprecedented temperatures, economic fluctuations, political unrest, and the advent of generative artificial intelligence, have underscored the prevalence of systemic risks.
Such risks, due to their scale and widespread impact, pose significant challenges to the traditional insurance model of risk pooling and redistribution. The industry, therefore, must be proactive in adapting its services and developing products that meet the evolving needs of customers.
The Geneva Association’s report, “The Value of Insurance in a Changing Risk Landscape,” highlights the shifting dynamics of risk and the importance of the insurance industry in fostering resilient economies and societies. This support aligns with RGA’s mission to enhance financial protection accessibility.
Underscoring the changing risk landscape, the pandemic has highlighted the systemic nature of emerging risks, affecting global populations simultaneously and challenging the insurance industry’s capacity to manage such widespread risks alone. Customers express particular concern over the insurability of natural catastrophes, cyber risks, and longevity, given the changing climate, technological vulnerabilities, and demographic shifts.
The report also introduces a framework to assess the insurability of emerging risks, considering their novelty, changing characteristics, knowledge gaps, and governance issues. This framework helps in distinguishing between tangible and intangible risks, offering a structured approach for the insurance industry to navigate the evolving risk environment.
The increasing threat of climate and cyber risks presents obstacles to insurability, with concerns that insurance for these risks may become unaffordable or unavailable. However, the report suggests that technological advancements and alternative capital could bridge the gap in traditional risk transfer mechanisms, making emerging risks more insurable.
There is also a growing market demand for services that extend beyond financial protection, focusing on risk prediction and prevention. Initiatives aimed at promoting healthier lifestyles have garnered interest from over 80% of survey respondents, though a smaller percentage currently utilise these services, indicating a significant opportunity for the insurance sector.
The report encourages insurers to leverage their expertise not only in mitigating risk but also in fostering positive societal change, particularly in the realm of sustainability. RGA embraces this perspective, considering sustainability central to its success and integral to its business model.
“Risk is our business at RGA, and we see risk management as integral to our culture and the responsibility of every RGA employee,” Porter said. “We proudly support the Geneva Association’s efforts to better understand emerging risks. Working together to tackle our biggest challenges, re/insurers can build a better future for our industry, our customers, and our world.”
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