SONAR 2025: New emerging risk insights

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This year's SONAR report identifies eight emerging risks, such as the impacts of extreme heat, fungal disease spreading and building fungicide resistance, harm caused by plastics, and potential claims from increased consumption of ultra-processed foods. The report also raises five significant structural risks facing insurers.

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Emerging risks

Climate change is driving extreme heat and fungi-related risks. More frequent heatwaves increase the risk of accidents, electrical outages, wildfires and put stress on healthcare systems. Warmer temperatures also enable fungi to thrive, and many are becoming resistant to the few available fungicides. This could lead to more claims for toxic mould in buildings and multi-drug-resistant fungal infections in humans and crops, potentially affecting property, casualty and agricultural insurance.

Another major concern is the proliferation of plastics and ultra-processed foods (UPFs). Environmental and health impacts of plastics, particularly plastic particles, are driving litigation and regulatory changes. If advances in science indicate a causal link to health problems, there could be an increase in associated liability lawsuits. Similarly, some research links high consumption of some UPFs to obesity, type 2 diabetes and other chronic diseases, which could result in increased health insurance claims and lawsuits against food manufacturers.

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In the workforce, the combination of retirement waves and rapid technological changes is creating people and skills shortages. This is particularly pertinent in high-hazard and healthcare industries, which could lead to increased claims in health and liability insurance, and affect professional and employer liability, as well as workers' compensation.

The evolving digital landscape is introducing new risks for insurers. As electronic health records (EHR) become more prevalent and enhance healthcare delivery, they also raise data security and privacy concerns, potentially leading to cyber insurance claims. Emerging technologies such as AI and virtual assistance, including robotics-assisted surgery, could improve healthcare delivery outcomes, but process failures could also introduce product liability and professional indemnity risks. The rise of deepfake technology and disinformation targeted at insurers further complicates matters, enabling sophisticated insurance fraud and cyberattacks, and increasing operational costs.

As drone technology evolves and new applications emerge, unexpected side effects could impact trade and compliance regimes as well as airspace security. Potential terror attacks could cause significant property damage, while expanding drone operations may lead to increased liability losses and privacy issues.

Structural risks
 

Across all business areas

Declining consumer trust in institutions, including insurers

Excess mortality variance: uncertainty for L&H claims and reserves

Digital technology: mostly a liability insurance story

Social inflation risks could expand liability claims

Aging populations: mortality protection products at risk

Emerging risks
(short-term)

Extreme heat: the insurance fallouts

How deepfakes, disinformation and AI amplify insurance fraud

How hot temperatures fuel fungi growth and insurance losses

New technology in health services: EHRs and AI

New risks from drone technology

Emerging risks
(medium-term)

Plastics: a new wave of litigation?

Emerging workforce and skill set shortages challenge insurers

Ultra-processed foods – health and liability risks

High risk

Medium risk

Low risk

Most affected business areas:

Property lines

Specialty lines

Casualty

Life & Health

Financial markets incl. insurers’ assets

Operations incl. regulatory changes

Source: Swiss Re Institute

Structural risks

One major structural risk is the significant lack of consumer trust in insurers, as surveys indicate. This affects policy sales and can lead to reputational issues and regulatory pressure. Another concern is tort law, where the severity of insurance claims surges beyond what is caused by economic drivers, particularly in the US. This challenges the liability insurance business and reduces the capacity for risk transfer.

Excess mortality is another pressing issue, with levels of mortality remaining elevated post-COVID-19, impacting life and health claims and reserves. Additionally, ageing populations pose a challenge to the mortality protection business due to demographic shifts, affecting health and long-term care services. Lastly, digitalisation brings its own set of ramifications, including the fallouts from digital innovation and AI-driven health monitoring, as well as increased cyber risks.

Insurance industry implications

The interplay of structural and emerging risks shapes the operating environment for insurers, influencing risk pricing, claims, and reserves. By understanding and integrating these risks into decision-making processes, companies can enhance their resilience and stability. SONAR underscores the importance of managing these risks to protect policyholders, support economic stability, and safeguard insurers' operations.

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