December 22nd, 2014

Understanding Emerging Risks: Imperative for the Future

Posted at 1:00 AM ET

The downside focus of risk measures highlights what could be a key problem with the debate around emerging risks - when people think about risk they only consider the downside. Cars, penicillin, fossil fuels, the internet - all of these were once emerging risks, and they have caused global destruction through car accidents, antibiotic resistance, climate change, and now, possibly through cyber risk. But they have also brought far better travel, longer and much healthier lives for almost everyone, affordable electricity for people in their own homes, and an explosion of information on a scale never seen before available freely at the click of a button.

Continually improving our understanding of risk is imperative for the future of insurance, and of finance as a whole. Finding new ways to visualize and communicate risk is something we can all do to make this possible. Only when the true origin of a risk is discovered, can it be truly mitigated.

Whatever the category of emerging risk the main challenge lies in modeling and quantifying their potential impacts. Only in this way can insurers leverage their key capability, which is the creation of value by risk management.

Guy Carpenter offers advice and guidance to clients in these areas by delivering a powerful combination of specialized reinsurance broking expertise, strategic advisory services and industry-leading analytics.

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