“Watch out for hot risks on the rise: New trends!”

January 8, 2024
2 mins read

Trends to watch: New and emerging risks

  • Artificial intelligence will be transformative for the insurance industry, but it must be accompanied by strong safeguards to protect data and prevent biases.
  • Insurtechs can continue to innovate by integrating advanced short-duration parametric products with conventional indemnity solutions, drawing alternative capital sources to the market.
  • The E&S market is seeing double-digit rate growth and a lack of capacity, driving rate growth and lower limits in casualty, construction, wildfire, and hospitality.
  • The explosion of AI intensifies the need for regulation and raises concerns about discrimination bias and privacy.
  • Cybersecurity threats, geopolitical tensions, and emerging environmental risks challenge insurers and risk management teams.
  • Severe weather events and climate risk remain prominent issues for the property and casualty industry.
  • Investment in new products and services can help address climate risks such as wildfires and floods.
  • Cyber extortion events, wire fraud, and social engineering attacks are expected to increase in frequency and severity.
  • Cybersecurity attacks conducted via social engineering are predicted to see a dramatic increase.
  • Unpredictability in the P&C markets is driven by secondary losses and increased litigation.
  • Technology innovation will play a big role in the emerging area of climate insurance.
  • Emerging risks including environmental, geopolitical, and cyber risks are becoming more pervasive and severe.

Insurance professionals have identified several key trends and emerging risks that will shape the industry. Artificial intelligence is set to revolutionize insurance, but there is a need for strong safeguards to protect data and prevent biases. Insurtechs can play a key role in designing tools to bring transparency to AI models and ensure ongoing validity. They can also integrate advanced short-duration parametric products with conventional indemnity solutions, drawing alternative capital sources to the market.

The excess and surplus lines (E&S) market is experiencing double-digit rate growth and a lack of capacity, particularly in casualty, construction, wildfire, and hospitality. Insureds are turning to parametric insurance to complement traditional property policies. The explosion of AI has intensified the need for regulation and raised concerns about discrimination bias and privacy.

Cybersecurity threats, geopolitical tensions, and emerging environmental risks present challenges for insurers and risk management teams. Severe weather events and climate risk remain prominent issues for the property and casualty industry. Investment in new products and services can help address climate risks such as wildfires and floods.

Cyber extortion events, wire fraud, and social engineering attacks are expected to increase in frequency and severity, requiring organizations to remain diligent with their security advancements. There is also a predicted increase in cybersecurity attacks conducted via social engineering, highlighting the need for ongoing vigilance and agility in security measures.

The P&C markets face unpredictability driven by secondary losses and increased litigation. Secondary losses, which accounted for 60% of CAT losses, will continue to impact claims costs, pricing, and coverage appetites. Increased and nuclear litigation will drive unexpected losses and expenses in the general liability area.

Technology innovation will play a significant role in climate insurance, providing insurers with a clearer view of risk and enabling greater emphasis on risk mitigation and site resiliency measures. Emerging risks, including environmental, geopolitical, and cyber risks, are becoming increasingly pervasive and severe. The industry must rise to the challenge by developing new products and solutions and addressing rating, underwriting, and claims processes.

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