The COVID-19 pandemic and social unrest in 2020 remind us that the insurance industry’s challenges might change on a year-to-year basis, but they will never end. COVID-19 may represent the vanguard of a series of public health crises arising out of climate change, income inequity, fraying social safety nets, demographic imbalances, resource shortages and increasingly stressed urban infrastructures, according to John Trace, CEO, North America, Guy Carpenter, and Jay Dhru, Global Head of Business Intelligence, Guy Carpenter.
The industrial world is in the midst of a series of seminal changes that will radically change the nature of risk. Two of these seminal changes are climate change and the Fourth Industrial Revolution, which both carry the potential to be engines of great promise as well as great peril.
Climate change is nurturing extreme weather events; hurricanes are now more intense and occur more frequently, the polar ice caps are melting, sea levels are rising and threatening coastal cities, wildfires are raging and flooding is commonplace. These extreme weather events are changing the nature of risk and are causing misery and significant amounts of insured and uninsured loss. From an insurance and reinsurance product design perspective, addressing climate change is more of a scale and cognitive bias challenge than a product design problem. The industry has a working understanding of the principles underlying the business model and the associated risks, perils, hazards and insured assets.