Monitoring emerging risks
Emerging risks are developing or changing risks which are difficult to quantify and may have a high loss potential. They are marked by a high degree of uncertainty; even basic information, which would help adequately assess the frequency and severity of a given risk, is often lacking. Examples of such risks include climate change, asbestos liabilities, genetic engineering and nanotechnology.
Professional risk transfer involves identifying, assessing and diversifying risks. To manage risk capital efficiently, it is necessary to eliminate unexpected losses and unforeseen developments in claims. This, in turn, requires constant monitoring of changes to the risk landscape, and a structured approach to ensure that the findings are incorporated into the risk transfer process as early as possible.
Even today, risks are principally assessed reactively using empirical, mathematical models. However, the risk landscape is changing at an ever faster rate and claims are increasing as a result of growing interdependencies among risks. To avoid any unwanted surprises, the insurance industry needs a more anticipatory approach to examining risk by thinking in terms of models and scenarios. The ability to successfully manage and insure rapidly changing risks in the future means being able to identify and influence changes in the risk landscape – and the emerging risks that these generate – at an early stage.
Back to the CRO Emerging Risks Initiative
CRO Forum: Climate change
