From a shifting geopolitical environment, to a changing climate, to rapid advancements in technology, risks and opportunities are fast-moving, interconnected and ever-evolving. Risk managers and their insurer partners are embracing this uncertainty and finding new ways to understand and mitigate risks.
In today’s fast-moving world, the one thing it seems we can be certain of is that there will be more uncertainty. Risk managers and their insurer partners are adapting to a new era of polycrisis, characterised by multiple, interconnected challenges.
Recent events like the catastrophic California wildfires, the power outage in Portugal and Spain, the ongoing conflict in Ukraine and the Middle East, and dramatic policy swerves on the global political stage, underline the rapidity at which risks are evolving and the far-reaching effects they can have.
Added to this, rapid and widespread adoption of new technologies such as artificial intelligence (AI) mean that risk professionals are faced with a complicated and uncertain set of challenges and opportunities.
Future challenges
The recent AXA Future Risks Report highlighted some of the challenges that our clients expect to face in the years to come and underscored the interconnectedness and complexity of the risk environment today and in the future.
For the third consecutive year, experts, businesses and the public cited climate change, geopolitical instability and cyber security as the top three future risks.
Last year was the third most expensive year on record for natural catastrophe losses, with about $140 billion of economic losses, following the second most expensive year on record for natural disasters in 2023. Already this year, the unseasonal and devastating Los Angeles-area wildfires have resulted in an estimated insured loss of more than $40 billion, and sent out a stark warning about the unexpected effects of a changing climate.
The cost of cyber crime is growing too. Over the past three years, losses from cyber attacks have increased by about 15% to more than $80 billion. And as bad actors explore new techniques, like using AI, to exploit weaknesses in systems and increase both the effectiveness and the volume of their attacks, the frequency of cyber incidents looks set to continue to rise.
Meanwhile, the shifting geopolitical environment – in which changes seem to happen almost overnight – is forcing our clients to examine their supply chains, where they operate today and how their business might restructure or change in future to adapt to new normal.
Anticipating and embracing shifts
We see many of our clients making short-term decisions, like changing their logistics, to respond to these interconnected challenges. But many are also embracing the uncertainty about how the future might look and making strategic decisions that may result in opportunity.
For example, some clients are moving investments from certain territories to others. Some are taking a ‘regionalisation’ approach, rather than the ‘globalisation’ strategy that many multinational companies previously adhered to.
We are working to support our clients as they address this short and longer-term uncertainty. Our expertise in political risk, trade credit, war, terrorism and political violence, for example, enables us to provide immediate answers to some of these challenges. And, in addition to providing coverage for known risks, the visibility we have of the evolving trends, the interactions we have with different players in the economy around the world, and the meaningful and actionable data that we accrue means that we are in a position to help clients understand how these evolving risk patterns will affect them.
The impact of AI
Technology, and particularly AI, represents a huge opportunity for businesses of all types and has been integrated into many areas of our day-to-day lives far more quickly than we might have expected. Our clients need to strike a balance between ethical adoption, risk mitigation and the benefits of using AI – as do we.
The AXA Future Risks Report identifies AI and Big Data as the fourth most important risk facing companies, and more than half of the risk experts surveyed said they considered it to be a rapidly emerging risk. Indeed, some 36% of risk experts said they believed AI represented an ‘existential risk to mankind.’
There are steps that can be taken to reduce some of the risks that AI use might bring. For example, it’s vital to try to ensure that the data used is free of bias and that consumer protection is always top of mind.
Clients are keen to make sure that ethics are at the very heart of AI use and we are working with them to ensure that AI is used fairly and responsibly. As an insurer, we are mindful too of the need to empower our colleagues to use AI to help them focus on the areas of their roles where they add value.
Embracing innovation
In this rapidly changing world, both our clients and we need to innovate to embrace uncertainty and seize any opportunities.
Technological solutions like those developed by AXA Digital Commerce Platform (DCP) have enabled us to help clients gain real-time risk insights during the devasting Los Angeles wildfires, for example. We also are working on innovative ways to help our clients on their energy transition journeys.
In this constantly changing environment there is no room for complacency. It is our purpose to provide solutions to the challenges that our clients face today and will face tomorrow. Our ability to engage in projecting and anticipating risks means that we can, collectively, create an environment that is safer for our clients and the ecosystem in general.
