Emerging risks

Re/insurers operate in a rapidly changing and increasingly complex risk landscape. Demographic, economic, technological, socio-political, regulatory or environmental trends may change existing risks or create new ones. 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.

This complex landscape provides fertile ground for “emerging risks” – 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.

Detecting and investigating such 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 interactive intranet platform which enables our employees to share and discuss risk notions based on trends and developments in the re/insurance landscape. This allows for bottom-up identification and peer reviews.

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 research institutions and experts, and digitally enabled horizon scanning tools are also deployed. Finally, our specialists carry out in-depth investigations and internal reviews on selected topics.

You can learn more about one of these topics – the life and health implications of climate change – in the case study Emerging risk case study: life & health implications of climate change. To share some of our key insights on these emerging risks with external audiences, we published the sixth edition of our comprehensive SONAR Report in 2019 (see above).

Further activities on emerging risks identified in the past

The emerging risks we have previously examined in more detail and featured in our former Corporate Responsibility Reports since 2007 are:

2007: Electromagnetic fields

2008: Critical infrastructure

2009: Carbon nanotubes

2010: Smart grids

2011: Cyber attacks

2012: 3D printing

2013: New forms of mobility

2014: Electronic cigarettes

2015: The Internet of Things

2016: Human-induced earthquakes

2017: Antimicrobial resistance

2018: Algorithmic decision-making

Since we first identified these emerging risks, we have followed up on several of them in our core business and together with our stakeholders, eg Critical infrastructure and Cyber attacks:

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 risk dialogue with various partners. By sharing perceptions and assessments, all parties can gain a better understanding of potential emerging risks.