September 23, 2022
What Future Risks Worry Insurance Companies?
Here are the top five future risks troubling the reinsurance companies of the world, according to Swiss Re — reinsurers are the ones that back up the primary insurance companies who actually put their names on the policies (the retail insurers).
Legal tech — is AI rendering justice?
Over the past decades, AI in law has advanced from academic research to impactful practical application. A 2020 OECD report lists numerous examples of AI that can be applied in the law profession, including supporting judges in courts to reduce backlogs in cases, increasing legal access to more citizens, and reducing uncertainty around the application of financial regulations.
One of the biggest direct impacts to insurers could stem from lawyers using legal tech systems to zero in on those lawsuits/cases with the most chance of success. This could conflict with the legal purpose of providing justice for all, and also lead to a significant rise in claims loads.
Thawing permafrost — accelerating climate, infrastructure and health hazards.
Permafrost has been thawing at an increased speed over the past decades in both high latitudes and the mountainous regions across the world. This poses environmental, property and health risks, and may translate into property and liability claims, and also higher costs in life and health.
Permafrost is the ground (rock, soil and ice) that remains at or below 0°C (32°F) for two or more years, typically lying below the layer of ground that freezes and thaws annually. Such conditions apply — or once applied — to a quarter of the northern hemisphere, with most of the planet’s permafrost found in northern Russia, Canada, Alaska, Iceland and Scandinavia. Permafrost is also found in mountainous regions at high elevations. Climate change effects are expected to accelerate the thawing of large expanses of permafrost in numerous regions. This scenario presents many challenges, including ultimately for insurers.
Quantum computing — a threat before an opportunity.
With the rapid development of quantum computing (QC) capacity, reinsurers face new threats to data security, which could affect property, specialty and casualty lines as well as operations and assets and financial markets.
Challenges in construction — raw material shortages and price increases.
Inflationary pressures and raw material scarcity could affect quality and durability of buildings, posing risks to property, specialty and casualty lines.
Eroding trust — new worries for public health.
Swiss Re said life and health reinsurers could be affected by growing mistrust in public health officials and medical professionals, which “fosters harmful behavior and increases the risk of higher morbidity and mortality, particularly in future health crises.”