As insurers and reinsurers gathered in Monaco for the annual Rendez-Vous de Septembre (Sept. 5-9) to discuss market trends and set upcoming renewals, two reinsurers and an affiliate research institute sent out dispatches. They noted the risks posed by artificial intelligence (AI) and non-peak perils – that is those, like hailstorms, which fall short of the most severe natural disasters.

The dispatches, independently published by Munich Re, Swiss Re and the Swiss Re Institute, promote the value of reinsurance and give some insight into the reinsurers’ considerations when allocating capacity. 

Munich Re notes that global insured losses from non-peak perils exceeded $100 billion (all figures in U.S. dollars) last year, while cyber risks and risks posed by AI are increasingly reshaping the risk landscape.

They also point out that most global risks are occurring simultaneously, intensifying one another.

“Natural hazards and natural disasters, in particular, remain significant risk drivers. The impacts of climate change are becoming increasingly tangible,” Munich Re states. “Non-peak perils were long regarded as events involving comparatively low losses overall. They have now begun to add up to loss levels that were previously associated primarily with major events. This trend is progressively becoming the new normal.”

An insidious risk

Furthermore, the note discusses heat, calling it a more insidious risk which is increasingly driving claims, both for lives lost and for the damage heat causes to infrastructure, agriculture and supply chains.

It also mentions that cyber is currently one of the greatest business risks, but uptake of cyber insurance remains low. Studies by Munich Re suggest that 89 per cent of companies do not feel adequately protected.

“Standards have now been established for cyber risks, designed to address such risks precisely and provide appropriate cover. Concerning AI risks, this development is yet to come,” they add. “Demand is growing; at the same time, given the complex nature of these risks, there is a need for in-depth expertise, a keen understanding of risk and clear wording in contracts.”

Swiss Re’s dispatches, meanwhile, similarly focus on natural catastrophe losses, saying these continue to grow between five and seven per cent annually. Its modelling indicates that insured losses could reach $320 billion in a 2026 peak loss scenario.

Insurance premium opportunities

When it comes to AI, the reinsurer says infrastructure investments create opportunities. It notes that cumulative investment in data centres is expected to exceed $6 trillion by 2030. The Swiss Re Institute estimates a related global insurance premium opportunity of $91 billion by the end of the decade.

Adding renewable energy investments to the picture, the cumulative commercial insurance premiums could reach $200 billion by 2030, they add.

“The global economy has entered a capital expenditure (capex) super cycle, with surging investment in data centres, energy systems and other strategic infrastructure creating growing demand for commercial insurance,” Swiss Re writes.

The picture is not without its caveats, however.

“The investment boom is creating larger and more concentrated risks, as assets cluster in the same locations and increasingly depend on shared infrastructure and networks,” they write. The company’s chief underwriting officer, Gianfranco Lot, adds: “We are seeing the digital economy become a real economy. AI needs data centres, power grids and increasingly complex infrastructure – and all of it needs insurance. That creates growth opportunities across multiple lines of business but also significant risk concentrations.”

Swiss Re concludes by saying it is vital to understand how risks can accumulate going forward. “Understanding risk unlocks insurance capacity,” they write. “The principal constraint is not the availability of insurance capital, but the ability to deploy it confidently against increasingly complex exposures.”