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The insurance risk landscape is evolving rapidly

Ramesh Darbha

Environmental, technological, social, and business factors are driving unprecedented changes within the insurance risk landscape.

Increased natural catastrophe (NatCat) activity in the second half of 2018 led to an overall loss of US$160 billion, of which half was insured. Subsequently, the loss burden for insurers was substantially higher than the long-term average. The unusual phenomenon of severe tropical cyclones in the United States and Japan, as well as devastating wildfires in parts of California, led to this increase. Meanwhile, 2017 was the costliest for insurers in terms of insured NatCat losses in nearly four decades.[1] Extreme storms, record hurricanes, and wildfires spurred the losses.

On another front, global healthcare costs are escalating at alarming rates. In fact, the anticipated increase in medical-plan unit costs in 2019 (net of inflation) was 7.8%, which is 4.9 percentage points higher than the 2.9% annual worldwide inflation rate.[2]

Such phenomena are transforming the insurance risk landscape for the industry and customers by sparking new risks or by driving changes to the very nature of existing threats. The World Insurance Report (WIR) 2019[3] explores evolving risk and analyzes the emerging risks most likely to affect insurers and policyholders.

Let me share a few key highlights from our analysis. WIR 2019 classifies the drivers behind risk landscape changes into five macro trends: disruptive environmental patterns, technological advancements, evolving social and demographic trends, new medical and health concerns, and the changing business environment.

Disruptive environmental patterns such as increased frequency and the severity of cyclones and wildfires, climate change, scarcity of natural resources, and escalating micropollutant levels can be perilous to policyholders’ lives, health, property, and businesses. Threats spurred by these disruptive environmental patterns are further exacerbated by global economic interdependence, which means they may drive worldwide repercussions.

Technological advancements in artificial intelligence, connected devices, and nanotechnology are also introducing potential consequences that require a redefinition of traditional loss models. As digitization expands, so too does the frequency and severity of cyber attacks that may amplify security spending for businesses and cyber claims for insurers.

Phenomena such as the silver tsunami (aging population), more and savvier tech users, and the growing gig economy are leading to demographic shifts, too. These evolving social and demographic trends may see the elderly in many countries outliving their savings while gig workers find it difficult to secure comprehensive insurance coverage.

Today’s medical and health concerns – increased drug resistance, chronic ailments, and new infectious diseases – can adversely impact policyholders and drive up mortality rates. Moreover, lifestyle-induced risks such as obesity, diabetes, and hypertension, as well as behavioral health concerns including substance abuse, depression, and mood disorders pose serious health and life threats to individuals and productivity losses for businesses.

Financial, regulatory, and monetary policy risks loom over the insurance landscape along with geopolitical threats and increasing protectionism that affect all businesses (including insurers) by making access to global markets difficult.

How will emerging risks impact insurers?

Disruptive environmental conditions, tech advancements, social and demographic trends, medical and health concerns, and today’s dynamic business environment will likely lead to increased claims in the areas of business interruption, liability, life, health, and property.

All this as accurate risk assessment becomes more challenging because so little relevant comparative data exists. It may even lead to insurers offering coverage without appropriate premium increases, resulting in underwriting losses.

No doubt emerging risks have deep-seated implications for the insurance industry, and proactive steps are required. The time is now for insurers to understand and prioritize the impact of emerging risks and then adapt offerings to meet policyholders’ expanding risk needs.

Turn to the World Insurance Report 2019 [3] for insight into customer concerns about emerging risks and learn how insurers are responding.

[1] Munich Re press release, “Extreme storms, wildfires and droughts cause heavy nat cat losses in 2018,” January 8, 2019,

[2] AoN, “2019 Global Medical Trend Rates,, accessed April 2019.

[3] World Insurance Report 2019 is scheduled to be launched on May 14, 2019.