Global insurance executives selected a wide range of potential loss events—including some surprises—that they see as the most important extreme risks for the insurance industry in the long term, according to a recent Towers Watson survey.
Stephen Lowe, senior consultant, Risk Consulting and Software, Towers Watson, says, “Much as we would have expected pandemics and natural catastrophes to figure prominently in insurers’ extreme risk thinking, the high rankings of concerns such as cyber-warfare and a major data compromise in the cloud illustrate how the industry is keeping up to date with risk assessment.”
Interestingly, the technology risk was a user-submitted entry rather than a risk seeded by the survey originator.
Towers Watson says it sees a range of implications for insurers. The firm says in the case of a sovereign default, for example, the impact could go beyond insurers holding debt in the defaulting country to include a regional insurance crisis and an increase in M&A activity due to forced disposals from banking groups.
Click “next” to see the top-10 risks cited in the survey.
10. Sovereign default
Nonpayment by a major sovereign borrower causes market panic and disrupts the global economy.
9. Rise in extreme weather
Events exceed the capacity of insurance industry and governments to respond, with physical and social implications.
8. An extreme event
Causes property damage, supply-chain failures, business interruption and death on a significant scale.
7. Banking crisis
Central banks unable/unwilling to supply liquidity in the next crisis, causing banking and real economic activity to stop.
A deep and protracted trough in economic output, massive increase in unemployment, restriction of credit and shrinking investment.
A large quantity of personal, government or business data stored in clouds are found to be hacked, compromised or misused.
Computer sabotage/espionage on a major scale, with severe damage to infrastructure, financial, medical or defense systems.
3. Food/water/energy crisis
A major shortfall in the supply of, or access to, food/water/energy, causing severe societal issues.
2. Natural catastrophe
A confluence of major earthquakes, tsunamis, hurricanes, flooding and/or volcanic eruptions with major global effects.
A new, highly infectious and fatal disease spreads through human, animal or plant populations worldwide.