Swiss Re’s 12th annual SONAR report, Swiss Re SONAR: New emerging risk insights in 2024 discusses 16 emerging risks and their potential impacts on the insurance industry and society. Among the risks discussed, they say the cascading effects of natural disasters is a key risk while underfunding public health, meanwhile, can also lead to higher morbidity and mortality rates, particularly in the case of a future pandemic.

“Compounding effects of natural catastrophes on critical infrastructure and supply chains generate loss accumulation,” they state. “Decreasing resilience of supply chains leads to more business interruptions, risking economic slowdown.” 

The crises, they add, are interconnected, bringing about ever-more complex risks.

The report includes a discussion about underfunded healthcare, social isolation and loneliness – a growing heath crisis – and the gender gap in health care. Climate change is discussed as an evolving threat to international security and big technology dependency risk is also considered.

Emerging risks, they say, are those that are new and challenging and difficult to quantify, despite having a significant impact on the industry. “The risks have been categorized according to their estimated time horizon, overall potential impact and by the lines of business that we think will be most exposed,” they write. 

“The compounding effects of hazard occurrence and the interconnectedness of critical infrastructure and supply chains can generate loss accumulation,” the report notes in its discussion about the cascading effects of natural catastrophes. “Accumulating and enduring impacts from natural catastrophes can hamper economic development, increase costs for the public sector and slow insurance market growth.” 

Lessons from “silent cyber” 

The report’s discussion about the unintended consequences when policies remain silent on specific risks is also discussed. “The increasing use of artificial intelligence (AI) could trigger claims across many lines of business. Insurers will need to develop an understanding of intended and unintended effects and design products that mitigate the risks,” they write, warning that AI has the potential to revolutionize the business but also open insurers to claims if AI models introduce bias or trigger discrimination.

Notably, however, they say “insurers need to analyze how AI-risks are dealt with in existing policies and how to best deal with them in the future. Which risks are already covered, and which perhaps only silently so (in other words, unintentionally, due to perhaps ambiguous language,” they write.

“With silent cyber, the industry has already learned lessons. There have been instances where some risks have been covered in non-cyber line policies, even though that was not the intention. With silent AI, it is time to prevent repetition of the same mistakes by understanding which risks traditional policies already (silently) cover.”