Emerging risks

To navigate today’s rapidly changing and increasingly complex risk landscape, re/insurers need to adopt a forward-looking approach that enables them to identify “emerging risk” – newly developing or changing risks that are not yet entirely understood and managed. Such risks are difficult to quantify, and their potential impact on society and the re/insurance industry is not yet sufficiently accounted for.

Emerging risks may arise from demographic, economic, technological, socio-political, regulatory or environmental trends. In addition, growing interdependencies between these developments can lead to accumulations of risk and create significant knock-on effects. People’s risk perceptions are shifting, liability and regulatory regimes continue to evolve and stakeholder expectations are growing.

Detecting and investigating emerging risks early on forms an important part of our comprehensive approach to risk management. In analysing how risks are evolving and related to each other, we seek to assess their potential impact on Swiss Re. This is vital to reduce uncertainty and prevent unforeseen losses, raising awareness within the Group and across our industry.

Our SONAR framework

SONAR (Systematic Observation of Notions Associated with Risk) is our Group-wide framework specifically designed to manage and communicate emerging risks. Firmly embedded in the Group’s risk management organisation, SONAR allows us to identify, assess and report these risks in a timely manner and to factor them into our strategic business decisions.

The SONAR process involves several integrated layers. The first is an internal social media channel which enables our employees to share and discuss risk notions based on trends and developments in the re/insurance landscape. Our emerging risk specialists periodically cluster and further assess these risk notions for their potential impact on our business. Further “early signals” are harvested from external sources. Finally, our specialists carry out in-depth investigations and internal reviews on selected topics.

To share our key insights on emerging risks with external audiences, we publish our yearly SONAR report (see box below).

SONAR 2021: New emerging risk insights

Through our annual SONAR report, Swiss Re shares emerging risk insights with re/insurance audiences and the broader public. The featured topics derive from our SONAR process and have been assessed by our experts regarding relevance and potential impacts on re/insurers.

In 2021, we published our SONAR report in mainly digital format for the first time, and in the future only a limited number of hard copies will be printed upon request. In parallel, we have strengthened digital emphasis and outreach.

SONAR 2021 features nine emerging risk themes and six emerging trend spotlights addressing a range of long-term effects of the COVID-19 pandemic on the one hand and a number of ESG-related topics on the other. Social and economic impacts as well as health and accident risk implications are discussed in the context of the pandemic. The ESG-related topics include heightened scrutiny of modern slavery in supply chains, re/insurers’ take on biodiversity and net-zero commitments, as well as sustainable digital consumer interaction.

SONAR 2021:

New emerging risk insights

Strategic foresight

Identifying and addressing emerging risks can be challenging. Their novelty and interconnectedness make it difficult to determine when a particular risk notion must be considered an emerging risk. Timing is of crucial importance. If measures to price and, eventually, exclude a particular risk are taken too early, we may not be able to offer our clients adequate re/insurance protection; if measures are taken too late, we may end up with increased loss potential.

Given these challenges, we believe it is essential to foster a risk dialogue with various partners. By sharing perceptions and assessments, all parties can gain a better understanding of potential emerging risks.