It was the best of times, it was the worst of times.” Charles Dickens’ words about the years before the French Revolution resonate more than ever today. Prosperity has risen across much of the world, but the threats we face are grave. Climate change, escalating conflicts, pandemics, economic displacement and the unknown impacts of ever more powerful digital technologies are concentrating minds on our capacity to manage multiple intertwined risks at once. 

The UN speaks of an age of ‘polycrisis’. Natural disasters are becoming more frequent and intense, with more people, and infrastructure, concentrated in the most exposed locations. Our research shows economic losses from natural catastrophes in the first half of 2023 were 46% higher than the period average over the past ten years. What’s more, those losses are often unprotected. Of the some USD 275 billion lost to natural disasters in 2022 less than half were insured, with a particularly severe protection gap in Asia. 

Climate change opens entirely new dimensions of risk – natural, economic and political. If the world fails to meet the Paris climate targets, we expect climate change to inhibit global economic growth by as much as 18 percent over the coming decades.The geopolitical consequences of this are not yet clear, but it is already evident climate change can contribute to resource scarcity, and that the effects could be profound.

Globalisation gives way to decoupling

Already, there are signs that the development gains of recent decades are under pressure. The World Food Programme warns of rising hunger, with intersecting crises having disrupted fertilizer shipments and food production.

Supply chains are changing to avoid geopolitical disruptions and climate-related events. This trend has been fanned by government policies designed to prevent technology transfer to geopolitical adversaries, raising the prospect of a broader decoupling that is likely to complicate supply networks further in the years ahead. 

Even as some trends are reinforcing national borders, others are breaking through them. Digitalisation allows information – and misinformation – to spread around the world almost instantaneously. It has created new business models, but also new forms of crime, some of them state-sponsored. The “NotPetya” cyberattack in Ukraine in 2017 caused billions of dollars’ worth of damage globally.

Highly regulated and sensitive industries are particularly at risk. Our research shows that data breaches in the healthcare sector are the most expensive, with the average cost of such incidents averaging almost USD 11 million in the first 3 quarters of 2023.

Many companies now view cyberattacks as the main threat to their business. Data has become central to many enterprises, and safeguarding it is a major focus for the corporate sector, including the insurance industry. At Swiss Re we forecast global cyber premiums to reach USD 15 billion in 2023, rising to USD 25 billion by end-2026.

Harnessing the power of data and technology

Yet despite the threats emerging from the cyber-landscape, digitalisation is also our best hope of making sense of the risks we face - and even of pre-empting them. The movement towards self-driving vehicles presents both an example and an analogy. 

Advanced driver assistance systems (ADAS) use sensors to continuously monitor the vehicle’s rapidly changing environment. This data is rapidly processed so that the system can react to a sudden risk or obstacle, applying the brakes or taking evasive manoeuvres. Research indicates that in the US alone, by 2050 ADAS could prevent 14 million injuries and a quarter of a million deaths.

The same principles of smart digital monitoring and analysis can serve to mitigate risks in many other areas. The internet of things, enabled by 5G cellular connectivity, means that monitoring can be extended to cover a huge array of physical devices and systems, allowing for problems to be flagged before they occur. 

Powerful new technologies such as artificial intelligence (AI) allow large volumes of unstructured data to be analysed in a granular way. In the insurance sector this is already automating parts of the underwriting process, code generation and analytics. As an industry, we have an obligation to drive the development of ethical AI that benefits society, ensuring it aligns with our values and needs. 

Digital technology is making us more efficient in other ways. At Swiss Re we estimate that the digitalisation of claims handling could reduce loss adjustment expenses by up to 25%, and general expenses by as much as 20%.

Gaining a more granular view of risk exposures

Perhaps the most exciting prospect is how digital environments can help us simulate scenarios and understand the impact of specific events on individual assets. A case in point is Swiss Re’s Risk Data & Services platform, in which the digital twin of a real-world asset can be created to an astonishing level of detail, and its resilience to various catastrophic events tested.

This demonstrates how we can think beyond insurance. Rather than offering simply a pool of capital that helps repair damage after an event, we can instead offer what I’ve come to see as resilience-as-a-service, giving our clients the data and tools they need to better understand their risks, and the opportunity to mitigate those risks before they materialise. 

The world is becoming more interconnected, more complicated, and in some respects, more perilous. But if we as re/insurers and our clients harness the power of data and systems, we can visualise and plan for more of the eventualities that the future may hold

By pooling knowledge and resources, using technology to enhance efficiency and addressing threats proactively and tactically, I believe that society can construct a shared and early response to some of the most difficult long-term challenges we face. Together, we can contribute to our ‘best of times’ becoming even better.

As I prepare to attend the 2024 edition of the World Economic Forum (WEF) later this month, I look forward to many engaging discussions with business leaders and decision makers around these important themes in order to continue to explore innovative ways to help advance corporate resilience.

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