NU Online News Service, Jan. 12, 2:28 p.m. EDT

Global interconnection has increased vulnerability to risks around the world, and insurer involvement will be critical in finding answers for the uncertain and volatile future, according to an official with the World Economic Forum.

The World Economic Forum released its "Global Risks 2011, Sixth Edition" report today, painting a picture of a highly volatile world where economic, geopolitical, environmental, societal and technological risks have become tightly interconnected. These risks are presenting major challenges for the world's governments that can no longer be solved by individual nations.

During a press conference in London and presented in a live webcast, Robert Greenhill, managing director and chief business officer for the World Economic Forum, said one of the key findings of this year's report is that global vulnerability is moving faster than ever. He said this was illustrated most effectively by the recent global financial crisis, which moved around the world in minutes as compared to the months it took for the Great Depression of the 1930s to spread.

He also noted that government disparity, in terms of economic and social inequalities, is contributing to the inability of governments to work together in a time of crisis.

Additionally, Mr. Greenhill pointed to economic disparity that is creating social upheavals and difficulties around the world and impacting other nations.

In the coming years, he noted, governments will need to get ahead of a crisis before it happens and deal with issues before they come to a head. It will also be equally important to identify potential crises before they happen, especially those with global ramifications.

"It is not impossible to address issues in advance; just very challenging," he said. "This is a call to action to deal with risk."

In answer to a question about the role of the insurance industry, Mr. Greenhill said insurers play a critical role in understanding risk and applying their powerful analytic tools to do that. He also noted that insurers are part of the answer to finding creative new tools to respond to these emerging risks.

"Insurers have a unique role to play and are a core group involved [in developing solutions]," he noted.

Daniel Hofman, group chief economist for Zurich Financial Services, noted that while insurers are in a position to analyze and cope with risk, many of the insurance answers are dependent on financial markets to develop innovative structures to shift risk, calling such solutions "vitally important."

However, the recent financial crisis has created an environment that is adverse to financial innovation, he said, and the markets need to embrace these concepts again.

Mr. Greenhill said there is a huge opportunity to deal with risk, but it requires a new mind set, and doing so "unlocks huge opportunity for the world as a whole if we do that."

Among some specific risks discussed, John Drzik, chief executive officer of Oliver Wyman Group, a member of Marsh & McLennan Companies, noted that there will be increased stress on commodities and dramatic price increases in the future as global economies expand. Population growth and climate change are among some of the contributing factors, along with market speculators. Dealing with these issues will require more planning and coordination at local levels, he said.

The changing world demographic, noted Christian Mumenthaler, chief marketing officer for Swiss Re, will put strains on economies dealing with an aging population and the need for increased productivity.

The private marketplace, he said, will be an important participant in the answers, but it cannot do it alone and will need to develop partnerships with governments to develop solutions.

Special Reports /

Insurers Critical To Developing Global Risk Answers

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