Navigating rising liability risks:
Product complexity and hydrogen technologies
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Technological innovation is reshaping liability risk across industries. For corporate risk managers and insurance brokers, two trends stand out: rapidly increasing product complexity and the growing adoption of hydrogen technologies. Both are driving new risk exposures, amplifying loss potential, and challenging traditional risk assessment approaches.
This article brings together key risk drivers, insights from real loss events, and practical mitigation measures, grounded in Swiss Re Corporate Solutions’ structured risk assessment methodology.
Product complexity: a growing liability challenge
Modern products, particularly in sectors such as automotive, are becoming significantly more complex. Today’s vehicles, for example, rely on vast amounts of software code and interconnected systems, increasing the potential for systemic failures. A modern car can contain over 100 million lines of code, illustrating the scale of this complexity.
Greater complexity translates into:
- higher likelihood of design-related defects
- broader impact across multiple product lines or generations
- increased difficulty in identifying root causes and affected units
Evidence suggests that design-related issues can lead to some of the largest recalls in the automotive sector, in some cases affecting more than 500,000 units per defect.
By contrast, manufacturing or supplier-related defects are typically more contained, often affecting 5,000 to 20,000 units, making design responsibility a key driver of liability risk.
Hydrogen technologies: emerging risks in evolving systems
As industries invest in hydrogen-based solutions, new risks are emerging - particularly where existing products are adapted for new applications.
Recent loss events involving hydrogen sensor failures and valve malfunctions highlight this issue. Hydrogen leaks, combined with failures in detection, increase the risk of fire. Root causes of such defects may include:
- insufficient testing under real operating conditions
- incomplete product validation
- inadequate data infrastructure for early fault detection
These incidents have resulted in multi-million losses across the US, Europe, and Asia, underscoring how novel technologies can introduce hidden vulnerabilities when validation processes lag behind innovation.
Key liability risk drivers
Swiss Re’s assessment methodology identifies and quantifies over 80 risk drivers. Four of the most significant are:
Further Information
Design responsibility
Companies carrying combined design and manufacturing responsibility for their products (OEMs, Tier 1 system suppliers) display materially higher exposure. Design flaws can propagate across multiple models, product generations and even industries.
Mitigation priorities include quality-gate centric product development, early-stage risk analysis via in-house experts using purpose-built tools, and clear contractual allocation of liability across partners.
Product maturity
New unproven products and technologies lack long-term market validation and, therefore, present elevated uncertainty.
Mitigation priorities include validation by independent, accredited testing laboratories and the systematic use of failure analysis tools such as FMEA.
Quality management
Effective quality management is essential in complex production environments. The focus is not only on defined processes, but on how consistently they are executed and improved.
Mitigation priorities include real-time data analytics for early defect detection, continuous improvement based on quality KPIs, cross-site 'lessons learned' systems supported by digital tools, and predictive maintenance for critical equipment.
Supplier management
Global supply chains are extremely complex and vulnerable to disruption. Weak supplier oversight can significantly increase liability exposure.
Mitigation priorities include quality-focused supplier selection rather than price-driven decisions, ongoing supplier performance monitoring through scorecards, clear contractual provisions on liability insurance requirements, and second-sourcing strategies for critical components.
From risk identification to quantification
Swiss Re Corporate Solutions’ Risk Engineering Services team applies a structured, data-driven approach to liability risk assessment. Each risk driver is assigned a fixed weighting based on impact on overall risk and combined with an account-specific risk evaluation.
This results in a transparent risk rating that supports more accurate underwriting and pricing, while also providing clients with actionable insights to improve their risk profile. The objective is clear: to create value beyond risk transfer and enable continuous, measurable risk improvement.
Turning insight into action
As product ecosystems evolve, liability risks are becoming more systemic, interconnected and harder to detect. For risk managers and brokers, this requires a shift from reactive to proactive risk management within the broader casualty landscape.
By focusing on design integrity, rigorous validation, data-driven quality management, and resilient supply chains, organisations can notably reduce both the frequency and severity of losses.
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Ankur Batra
