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Unveiling Emerging Risks: Natural Disasters and Supply Chain Vulnerabilities

Navigating New Threats in the Insurance Landscape

Author

Zachary Parris
June 12, 2024

Artist's rendition of a tornado destroying a structure.

Photo by NOAA

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Swiss Re’s latest SONAR report highlights key emerging risks that the global economy, businesses, and the insurance sector must address urgently. These risks, driven by increasing natural disasters, weakening supply chain resilience, and underfunded healthcare systems, pose significant threats to economic and operational stability.

Swiss Re published its 12th SONAR report identifying critical emerging risks. The findings impact global economies, businesses, and the insurance/reinsurance industry. The report was released on June 12, 2024.

Understanding these risks is crucial for businesses and insurers to develop strategies for resilience and sustainability. Addressing these challenges can mitigate potential losses and enhance operational efficiency.

Key Insights:

  1. Natural Disasters: Increasing frequency and severity of natural catastrophes like floods and wildfires are not only causing direct damage but also disrupting critical infrastructure and supply chains. This poses additional risks of production delays and economic losses.

  2. Supply Chain Resilience: The fragility of global supply chains is becoming more evident, with disruptions leading to significant economic impacts. Enhancing resilience is vital for maintaining business continuity.

  3. Healthcare Underfunding: Insufficient investment in healthcare systems can lead to higher morbidity and mortality rates, exacerbating the effects of future pandemics and impacting global GDP.

  4. AI and Cyber Risks: The growing use of AI and digital technologies brings new risks, including cyber fraud and unintended insurance impacts from AI system failures.

  5. Financial Market Risks: The rapid dissemination of financial information through social media can lead to market volatility and irrational investment decisions, affecting insurers’ profitability.