Reinsurers today are operating in a risk landscape that is shifting ever more rapidly. Charting emerging risks and opportunities in a pre-emptive way is an important element of Swiss Re’s integrated approach to risk management.
How we define emerging risks
We define emerging risks as newly developing or changing risks which are difficult to quantify and which may have a major impact on an organisation. We investigate these risks because of the substantial potential impact on our business.
Key drivers of the changing risk landscape include new economic, technological, socio-political and environmental developments as well as the growing interdependencies between them which can lead to an increasing accumulation of risk. In addition, there is a changing business environment to consider: liability and regulatory regimes continue to evolve, stakeholder expectations are strengthening and risk perception shifting.
The key is to reduce uncertainty and thus help diminish the volatility of business results. While risks today are assessed largely reactively based on loss experience, a faster pace of change requires a more anticipatory approach. To achieve this, we strive to translate risks associated with high uncertainty into a quantifiable measure.
SONAR – thinking in scenarios
We have steadily built up a Group-wide emerging risk approach called SONAR (“systematic observation of notions associated with risk”) which comprises four stages: identification, assessment, implementation and monitoring/control. Clear responsibilities are given to two governing bodies. The assessment methodologies we apply can vary in depth and scope. Thinking in scenarios plays an increasingly important role in them. These scenarios can be understood as rigorously conducted thought experiments on possible future situations.
Swiss Re SONAR: new emerging risk insights for 2015
De-globalisation, super natural catastrophes, financial repression and the challenges posed by the "internet of things" are some of the risks discussed in Swiss Re's 2015 SONAR. They are also the risks...