“Today’s risk environment is defined by interconnected uncertainty,” said Andreas Berger, Group CEO, Swiss Re and a keynote speaker at this year’s Airmic conference in Birmingham. In Berger’s view, “the core question in re/insurance is no longer simply: how do we transfer risk? Instead, we need to be asking ourselves this: how do we build resilience in a world where uncertainty and volatility are accelerating?
The conference’s theme this year was entitled Back to Basics, a rallying call to simplicity. The message it is trying to convey is that risk management is more complex than ever so requires a commitment to developing more informed decision-making capabilities and better partnerships.
Amplification of risk
The Economist Intelligence Unit predicts continued volatility and the amplification of different incremental risk being driven by new demand for data centers, to take just one example. According to an early conference session audience poll, there are three key risks for risk managers: a) supply chain, just in time, one supplier affecting many firms, b) cyber security and c) energy and security e.g. oil price up and down 55% in recent months.
One speaker described the twin threats of interconnection and amplification – how do these things connect? We are seeing a pivot towards physical infrastructure risk, the re-emergence of picks and shovels, to build the infrastructure required to enable the digital revolution so it is not just about the intangibles. The need for power generation, and advanced defence companies to protect these assets is fueling this new interconnected economy.
Climate risk is still there. The AXA future risks survey still has climate as the number one threat, but risk managers and insurers may have taken their eye off this green ball of risk in the short term.
Profound shocks
Iran has impacted the energy transition because it has had a profound economic shock which has pushed energy security to the top of the board agenda. Some economies may default to oil and gas in the short term to preserve their economic security, but the long-term trend will be to revert to renewables.
Four out of five business leaders believe that electrification will be key to operational resilience. Risk managers at one session were told that they are limiting themselves with risk registers. They need to go much further, however, to map key vulnerabilities, to see the interconnections where the lines of risk are blurring – that will embed resilience.
Scenario planning for geopolitical risk is a priority for security for 2026 – developing stress testing which cuts across strategy, operations and resilience –and important to make continuous incremental improvements.
Map the Gap
The insurance market operates in this siloed way, and the broker’s role should be to understand and map the protection gap before the loss gets to it e.g. the business interruption event, and in a world of real innovation it becomes difficult to see where insurance begins and where it ends. It is not and dried in the way it has been for so long.
Clarissa Franks, Head of Retail, Lockton UK said that the risks are too complex for individual companies to manage them by themselves. We can’t be too transactional about these risks, so it is about adding value beyond the transaction – insights, analytics, data enabling clients to make better decisions, collaboration, partnerships and commitment to long-term relationships.
Emerging risks and uncertainty – anxiety to actions
John White, Head of Growth and Innovation Risk Consulting, Marsh talked about turning anxiety into actions. Risk professionals need a 360-degree view to understand all of this emerging risk, with data insights to get a critical resilience threat assessment. Risk is more dynamic and interconnected with AI emerging. In the past, the world was more stable for risk managers, so the old simplicity has gone, while complexity amplifies.
View from Russell
Chris Don, Head of Communications and External Affairs at Russell said: “New technology demands tremendous resources, for example, TCMC in Taiwan uses 110,000 swimming pools of water a day to produce semiconductors. Taiwan still needs water, however, to grow its own crops so there is a fine line between growth and food staples.
“Risk managers and insurers it seems are going outside of their company to pull in external insights and data to manage risk. How do you bring emerging risk insights into your day to day, connect horizon scanning with how you action change, and combine scenario planning with stress testing? These are important questions. The key takeaway for me is that interconnectivity and global business complexity is amplifying risk and that we may need to go back to basics – human intelligence – to turn this complexity into clarity.”
