Emerging risks insights
Our vital systems and infrastructures are under threat from emerging risks that have the potential to cause claims of a substantial magnitude.
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Emerging risks are new or future risks whose hazard potential is not yet reliably known and whose implications are difficult to assess. These risks may evolve over time from weak signals to clear tendencies with a high potential for danger. Emerging risks may entail either risks which have arisen recently or are anticipated in the future (new risks) or risks which, although known previously, demonstrate an evolving character or show changing dynamics in unexpected ways with the consequence of unanticipated losses (evolving risks).
It is therefore important to detect such risks at an early stage and to systematically identify them, determine their relevance and assess the risk that they pose. As the frequency and severity of these risks in several cases are completely unknown, the traditional risk identification and monitoring processes will not work. Specific strategies and approaches must be implemented to cope with them properly, as there are typically no historical data for risk managers and underwriters to rely on.
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As an integral part of its risk managing process, Hannover Re has established the research group "Emerging Risks and Scientific Affairs". The group identifies, evaluates and monitors these emerging risks. An additional task for this interdisciplinary group is to translate science into insurance terms to close the gap between ever-increasing speed in scientific progress and day-to-day underwriting and risk management.
The general concern about risks is described in a paper on "Emerging Risks in the 21st Century" published by the OECD back in 2003:
"New and terrifying events are happening as we take out first steps into the 21st century. The world's population has always been faced with "risk" – but the difference today is that risks can now reach magnitudes of harm that hadn't been imagined in modern times. They have the potential for inflicting devastating damages on the vital systems and infrastructures on which our society depends. The menace to all that people value – the environment, property, health, life itself – has never been greater."
In order to increase the awareness of such emerging risks in the (re)insurance industry, Hannover Re publishes risk briefings with reference to current topics on a regular basis.