A constant dialogue around emerging risks is the basis for effective risk management
The world is grappling with the impact of the COVID-19 crisis. As the pandemic is ongoing, it raises many uncertainties and new risks develop. Often, such assumed emerging risks don't come out of the blue; they have been lingering for a while. We have to say, the same is true for the current pandemic.
The question for me never was whether a next pandemic will occur but rather when and to what extent and how well our healthcare systems and societies are prepared to deal with the threat. In our SONAR reports, which we have published since 2013, we have several times profiled the potential for fast and widespread infectious diseases due to increased human mobility and trade in food. We have looked at the impact a potential pandemic could have on the global supply chain and financial markets, and whether societies would be prepared to deal with them. Have we as a society overlooked these early signs? Yes and no, but everyone has probably underestimated the magnitude of the reach and depth of the containment measures.
So, what are we overlooking now? At the beginning of the year, the political agenda and discussions in media were dominated by climate change. Attention then shifted to COVID-19. Nevertheless, adaptation to climate risks and the transition to a low-carbon economy with related opportunities and risks for the insurance industry remain crucial. A higher frequency of heat waves, droughts and devastating storms, but also the increasing concentration of CO2 in the atmosphere, could over time threaten our livelihood just as the virus does. This is just one example. There are many more.
Slow burning emerging risks and trends are easily pushed to the back burner and are often overtaken by more acute risks. But they can turn into major risks for the insurance industry and society alike. We have seen this again and again. A case in point was asbestos with decades of early warning signs. More recent examples include cloud risk accumulation and cyber risks or the opioid epidemic.
Risk identification and a constant dialogue around emerging risks are key for the entire industry to get - and keep - such risks on the radar. The last few weeks have shown the utmost importance of such forward-looking risk management. We contribute to this dialogue with our SONAR report, which is based on an internal crowdsourcing platform for collecting potential risks from internal and external sources. Sensing a risk is a crucial first step. Even more important is the mentioned risk dialogue with all stakeholders which serves three purposes: raise risk awareness, protect the balance sheet from undue risks and enable business opportunities by identifying risks worth taking. It is only with this comprehensive view that we can offer the coverages needed to make the world more resilient in the face of new and emerging risks.