Digital technology’s clash with legacy hardware, new risks emerging from the spread of 5G mobile networks, increasingly limited fiscal and monetary policy flexibility, and genetic testing and its effects on the insurance industry, as well as the effects of climate change on public health are some of the risks identified in this year’s Swiss Re Institute SONAR report. The publication is based on the SONAR process to pick up early signals of what lies beyond the horizon.
The five risks with high potential impact on the industry are:
Teaching an old dog new tricks: New technologies meet ageing infrastructure. Technological improvements are ongoing. Hardware in areas of critical infrastructure, including smart electric power grids or pipelines and two hospitals, however, is often outdated. As a consequence, insurers face higher risk accumulation and unexpected loss potential in the areas of property damage, bodily injury, business interruption and cyber risk.
Off the leash: The spread of 5G technology. 5G will enable wireless connectivity in real time for any device of the internet of things, such as autonomous cars or sensor-steered factories. Current concerns regarding potential negative health effects from electromagnetic fields are likely to increase. In addition, hackers can also exploit 5G speed and volume to acquire (or steal) more data faster. Major concerns are possible privacy and security breaches, as well as espionage.
Limits to central bank tinkering: There is a growing consensus that another economic downturn will need a fiscal response. The re/insurance industry could benefit if changes to policy bring growth and financial stability. However, a rise in uncertainty, causing higher financial market volatility and declines in asset valuations, is a potential risk factor.
Don’t ask, don’t tell: The growth of genetic testing. Over the past years, the cost of genetic testing has declined significantly and with direct-to-consumer testing kits, genetic tests are now increasingly available and affordable for individual use. They have been widely adopted by public health systems and individuals. This has significant implications for life insurers, both in regard to data management and regulatory constraints.
It’s existential: Climate change and public health. The most pronounced risks from climate change affecting human health stem from heatwaves, floods, droughts, fires and vector-borne diseases. Millions of lives and healthcare services could be at risk. Without action, mortality rates and healthcare costs could soar, with significant consequences for the health, workers’ compensation and life insurance lines of business. A