The nature of risk is changing in today’s interconnected and fast-paced world. Climate and cyber threats in particular are increasing systemic risk, while trends such as digitalisation and ESG disclosure are driving up intangible risk. By making it more difficult for insurers to pool and redistribute risk, these shifts present challenges to insurability.
This report uses a novel framework to examine emerging risks and analyse their future scope of insurability, based on the assessment of the novelty and changing nature of risks, as well as knowledge- and governance-related drivers. To complement this analysis and gain insight on customers’ risk perceptions, The Geneva Association carried out a survey of consumers in the world’s six largest insurance markets.
The findings are remarkably convergent. Due to their lack of independence and massive loss potentials, the theoretical analysis finds that climate and cyber risks present significant obstacles to insurability. In turn, the survey results reveal that the majority of customers – both retail and commercial – across all of the markets studied worry that insurance for these risks will become either too expensive or unavailable.
In response to the changing risk landscape, insurers are increasingly focusing on the provision of services that go beyond financial risk absorption, such as risk prediction and prevention and post-event assistance. The survey results endorse the pursuit of such approaches, with over 80% of respondents expressing interest in such services. With current usage levels standing at between 30% and 50%, there is a clear opportunity for insurers to further expand their offerings.