Addressing the emerging risks of 2024 | Insurance business America
RGA’s global chief risk officer on the future of insurance
Risk management news
By Kenneth Araullo
The insurance sector, whose fundamental mission is to mitigate risk through risk pooling and redistribution, faces a transformative challenge as the nature of risk evolves amid a rapidly changing cultural, geopolitical and environmental landscape.
Jonathan Porter (pictured above), Global Chief Risk Officer at Reinsurance Group of America (RGA), explains how a Geneva Association report highlights the need for the insurance industry to adapt its traditional business models to keep pace with these changes.
Recent global events, including the COVID-19 pandemic, conflicts in Ukraine and Israel, unprecedented temperatures, economic fluctuations, political unrest and the emergence of generative artificial intelligence, have underscored the prevalence of systemic risks.
Such risks, due to their scale and far-reaching impact, pose significant challenges to the traditional insurance model of risk pooling and redistribution. The industry must therefore proactively adapt its services and develop products that meet the changing needs of customers.
The Geneva Association’s report “The Value of Insurance in a Changing Risk Landscape” highlights the changing dynamics of risk and the importance of the insurance industry in promoting resilient economies and societies. This support is consistent with the RGA’s mission to increase the accessibility of financial protection.
The pandemic has highlighted the changing risk landscape and highlighted the systemic nature of emerging risks, simultaneously affecting the global population and testing the insurance industry’s ability to manage such widespread risks alone. Customers express particular concerns about insurability of natural disasters, cyber risks and longevity in light of climate change, technological vulnerabilities and demographic shifts.
The report also introduces a framework for assessing the insurability of emerging risks, taking into account their novelty, changing characteristics, knowledge gaps and governance issues. This framework helps distinguish between tangible and intangible risks and provides the insurance industry with a structured approach to managing the evolving risk environment.
The increasing threat of climate and cyber risks poses barriers to insurability and there are concerns that insurance for these risks may become unaffordable or unavailable. However, the report suggests that technological advances and alternative capital could close the gap in traditional risk transfer mechanisms and make emerging risks more insurable.
Additionally, there is a growing market demand for services that go beyond financial protection and focus on risk prediction and prevention. Initiatives to promote healthier lifestyles attracted interest from over 80% of survey respondents, although a smaller percentage are currently using these services, indicating a significant opportunity for the insurance sector.
The report encourages insurers to use their expertise not only to reduce risk, but also to promote positive social change, particularly in the area of sustainability. RGA takes this perspective and sees sustainability as central to its success and an integral part of its business model.
“Risk is our business at RGA, and we view risk management as an integral part of our culture and the responsibility of every RGA employee,” Porter said. “We proudly support the Geneva Association’s efforts to better understand emerging risks. By tackling our biggest challenges together, re/insurers can create a better future for our industry, our customers and our world.”
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2024-02-12 18:43:51
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