Emerging risks what will we face in the future?

Emerging risks what will we face in the future? NHOs pensjons og forsikringskonferanse, 12 November 2014 Sandra Burmeier Senior Emerging Risk Manager sandra_burmeier@swissre.com +41 43 285 9506

Emerging risks arise from an ever changing risk landscape and are difficult to judge Today's risk landscape is changing faster than ever before: New economic, technological, socio-political, regulatory and environmental developments Growing interdependencies Evolving liability and regulatory regimes Strengthening stakeholder expectations Shifting risk perceptions This gives rise to emerging risks: newly developing or changing risks that are difficult to quantify and whose potential impact on our business is not yet sufficiently taken into account 2

Global trends will shape the risk landscape of the future This word cloud summarises trend lists from PwC, KPMG, Z-punkt, EEA, Forbes, CSIRO, Haygroup, Businessinsider.com and Euromonitor.com. It was created on www.wordle.net. 4

The WEF's Global Risks Report maps 31 global risks according to the level of concern of global leaders Source: WEF Global Risks 2014 9

Industry leaders are highly concerned about regulatory and economic topics Top threats as perceived by industry leaders (KPMG survey*): Regulatory pressure / changes in regulatory environment (46%) Reputational risk (41%) Credit/market/liquidity risk (34%) Geopolitical risk (e.g. Eurozone crisis (32%) Supply chain disruptions (28%) Information security/fraud (17%) Disruptive technology (17%) Data governance and quality (13%) Legal risk (12%) IT infrastructure (11%) Social media (9%) Natural disasters (9%) Climate change (7%) * Results of the 2013 KPMG survey "Expectations of Risk Management Outpacing Capabilities", www.kpmg.com 10

Cyber risks can have impacts on various insurance lines "Cyber risk" = any risk emanating from the use of electronic data and its transmission Cyber risks do not only affect covers exclusively designed for their insurance, but are also risk factors in conventional Property, Casualty and Life & Health covers Image sources: Swiss Re Information Security 11

Losses from natural catastrophe losses are increasing in many parts of the world Climate change results in rising intensity of storms, forest fires, droughts, flooding and heat waves in many regions Accumulation of assets in exposed areas increases losses If unmitigated, climate change could cost the world economy around 20% of global GDP by the end of this century Ocean Drive, FL, 1926 Ocean Drive, FL, 2000 12

Climate change and growing supply chain complexity can form a critical combination Illustrative supply chain network of a pharma company, overlaid with nat cat events (2010): 13

Solar storms and prolonged power blackouts Prolonged power blackouts have non-linear effects: Increased dependency makes today s society highly vulnerable to power supply interruptions A severe solar storm may damage transformers and lead to large scale power interruption, affecting large areas, and lasting from several days to months A large event goes beyond the scope of the insurance industry and requires collaboration across governments, businesses and society The solar storm infographic is available here: http://media.swissre.com/documents/swissre_solar_storms_ July_2013.pdf 14

(Re-)emerging infectious diseases pose a considerable risk in many parts of the world Emerging and re-emerging infections, 1996-2009 David Heymann; http://www.johnsnowsociety.org/lectures/lecture2009.html Drivers: Changes in land use or agricultural practices Changes in human demographics and society Poor population health (e.g. HIV, malnutrition) Poor hospitals and medical procedures Failure of public health programs Pathogen evolution (drug resistance, increased virulence) Contamination of food sources or water supplies Climate change International travel and trade 15

The current Ebola outbreak in west Africa is the largest and most complex since the virus was discovered in 1976 No. of cases: 13 042 No. of deaths: 4 818 Countries affected: 8 16

Climate change affects the geographic distribution patterns of many infectious diseases 1. Borreliosis 2. TBE 3. Hantavirus 4. Leishmaniasis 5. West Nile Fever 6. Chikungunya 7. Dengue 8. Tularemia Source: Semenza et al. 2012, Environ Health Perspect 120: 385-392 17

Interconnectivity of risks increases complexity Source: WEF Global Risks 2014 18

Foresight is key to prepare businesses for an uncertain future In the face of change, looking back is not sufficient to prepare for tomorrow's risks. Historical data Foresight information Yesterday s experience Tomorrow s exposure Today 19

We need to think the unthinkable! What is new, changing or non-typical? Think in scenarios and try to detect the risks of tomorrow. 20

Increasing enterprise resilience can help to cope with the unexpected Enterprise resilience is the capacity of business to survive, successfully adapt and prosper in the face of change and uncertainty. Structural resilience Integrative resilience Transformative resilience Redundancy Multi-scale Distributed governance Modularity Thresholds Foresight capacity Requisite diversity Social capital Innovation & experimentation Source: Kupers (ed): Turbulence A corporate perspective on Burmeier Emerging Risks 12 Nov 2014 Sandra collaborating for resilience. Amsterdam University Press 2014. 21

Conclusions With the world becoming more interconnected, it is getting ever harder to anticipate and manage global risk. This complex environment requires strong risk management capabilities and a risk-aware culture throughout the entire organisation. Foresight is key to prepare for an uncertain future where change is the only constant that remains. Increasing enterprise resilience strengthens a organisation's capacity to survive, develop and transform to prosper in complex environments. There is no silver bullet, but sharing knowledge is a good first step to prepare for what might lie ahead. 22

With the Swiss Re SONAR report, we share emerging risk information with our clients and partners The Swiss Re SONAR report is available here: http://media.swissre.com/documents/sonar_+emerging_risk_insights _from_swiss_re.pdf 23

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