Technological progress is accelerating at a rapid pace and with it are the risks and opportunities that accompany those changes in many different segments of our economy:
- Exposures to cyber-attacks are increasing due to proliferation of technology, cloud computing and electronic commerce.
- Medicinal advances, pharmaceutical breakthroughs and a continued focus on healthy life styles are prolonging our lives, increasing exposure for annuity or pension plan providers.
- The cost of medical services continues to increase, putting pressure on health (re)insurers to price their products correctly as well as adequately quantifying potential claims volatility over multiple years.
- New chemicals are being used every day in new products — and these new products could lead to new diseases that are not yet quantifiable, creating unknown implications for any number of product lines.
- New mechanical products and processes, such as drones, 3-D printing and self-driving automobiles are transforming the liability potential for (re)insurers in many different industries.
The emergence of these increasingly complex global risks are challenging the way the (re)insurance industry evaluates, analyzes and manages these new exposures.
Last year, in our report, “Ahead of the Curve: Understanding Emerging Risks,” we noted that the industry needs “to build credible models of potentially accumulating incidents so that risk appetites can be aligned with the exposures being faced.” However, the problem with emerging risks is the lack of historical data with which to build these models.
In this year’s report, “A Clearer View of Emerging Risks,” our goal is to assess the challenges facing the (re)insurance industry in modeling and quantifying the most pressing technological risks that society may face. Whether they are high-profile cyber-attacks that could stretch across several industries or a nation’s power grid to the global phenomenon of longer life spans that are having a major impact on pension funds and annuity writers, these risks require the industry to ask different questions in order to formulate effective models that will provide a more robust view into how these risks could develop over time.