Macro risks and other COVID-19-related threats impacting the insurance industry
Swiss Re's 2020 SONAR report analyzes global issues impacting the P&C and reinsurance industries this year.
The current COVID-19 health and economic crises have accelerated the number and impacts of new emerging risks and trends affecting the insurance industry.
Swiss Re’s “SONAR 2020: New emerging risk insights“ report identifies 23 macro trends — risks that persist from 2019 and recent years — and how the COVID-19 pandemic has affected them. These risks and trends reflect mid- to long-term factors believed to have high potential to shape the (re)insurance industry over the next 5–10 years, whether they be negative threats or promising opportunities.
The trends fall into interlinked “environment” categories, namely societal, political, competitive and business, as well as technological and natural environments.
Focusing on the main COVID-19-related risks and impacts, the report examines how the pandemic has exposed structural weaknesses in supply chains, healthcare systems and “intergenerational cohesion,” balancing younger generations’ desire to open economies and find work versus the need to keep older generations safe.
Environmental benefits we’ve seen as a result of economies shutting down and the role the insurance industry can play in encouraging a low-carbon economic recovery
Additional long-term macro risks still percolating, such as cyber risks brought by edge computing, continued boom of e-cigarettes and lack of expertise with sustainable building materials
In addition, the report highlights overarching topics that feature strong interdependencies between certain macro trends while also reflecting today’s reality, and which we expect will shape the future of our industry.
“After this global crisis, which shows the importance of forward-looking risk management, society will need to adapt to many changes, some of which will continue to linger on,” writes Patrick Raaflaub, group chief risk officer, Swiss Re.
The pandemic experience will continue to prompt shifts in the political landscape, regulatory environment and in market dynamics, the SONAR report said. It will also bring about a refocus in priorities, as the world moves toward planning its economic recovery.
Carbon removal and insurance
It is forecast that the carbon removal industry will grow to the size of today’s oil & gas industry by 2050. However, the industry is still in its infancy and scalability has yet to be proven. The said growth would bring a wealth of opportunities for insurance and investments, along with many challenges.
Innovative insurance could facilitate the continued growth of the carbon removal industry.
A transition to a low carbon economy offers risks and opportunities for the (re)insurance industry, such as carbon removal solutions. The re/insurance industry can play a pivotal role in shaping a more sustainable world by providing specialist risk transfer knowledge and capacity to partners in other sectors of the economy.
Related: