The term “uninsurability” is making headlines and generating growing concern. The discussion is fueled by reports of insurance companies withdrawing from California’s property market due to the challenge of pricing natural disasters, such as wildfires, and Floridians leaving the state due to soaring homeowner insurance costs. This has sparked a debate on the core insurability of climate-related risks. Additionally, Lloyds of London warns of a potential scenario where the global economy could lose $3.5 trillion due to a major cyberattack on payment systems, losses that the private insurance sector would be unable to absorb.
While studying such scenarios is a routine part of risk management, the headlines are prompting an honest discussion about the cost of prioritizing security, whether it be environmental disasters caused by human activity or digital threats. Despite this healthy debate, there is a tendency to reach a false conclusion that insurers are increasingly unable to measure and manage today’s most crucial risks, such as climate change or cybersecurity, and are walking away from them. Calling for government backstops is only a partial solution for catastrophic peak loss scenarios. As an industry, we must provide solutions for the concerns that keep our customers awake at night.
Today, we released the Allianz Risk Barometer 2024, shedding light on the most pressing risks facing global businesses.
The report reveals that cyber security is the top global risk, with cyber-attacks and IT outages reaching record losses in 2023, largely due to a resurgence in ransomware and extortion. Cyber threats are evolving, with hackers increasingly targeting IT and physical supply chains, launching mass cyber-attacks, and devising new methods to extort money from businesses of all sizes.
Natural hazards and extreme weather have become the third-highest major risk, climbing from the sixth position last year. Climate change remains at number seven among the top global risks. The trajectory of natural catastrophe losses has been steadily rising, with 2023 witnessing record insured losses from natural catastrophe events exceeding $100 billion for the fourth consecutive year, attributed to a warming climate. Business interruption, often caused by cyber or natural catastrophes, ranks second in this year’s Risk Barometer.
What is evident is that cyber and climate risks exemplify the nature of modern risk—ever-changing, evolving, challenging to predict based on past experiences, highly complex, connected, and globally interdependent. Lastly, they have the potential to cause catastrophic loss scenarios that could turn these risks into potentially systemic ones.
Learn more here: https://www.allianz.com/en/press/news/business/insurance/240118-allianz-rewriting-the-underwriting-story-christopher-townsend-editorial.html