Helping contain the human costs exacted by a risky world

Swiss Re's 2023 SONAR  again tackles new emerging risks of often existential significance. But smaller perils that strike closer to home also help bring the human cost exacted by a risky world into clear focus. Whether global or local, all risks have something in common: Identifying them early so they can be properly mitigated remains a cornerstone of resilient societies.

Switzerland is often seen as a safe haven, but Swiss Re's home country has in recent weeks had a front-row seat to the unique hazards posed by its rugged landscape. Residents of Brienz, a 1,200-year-old village in the Swiss Alps, were ordered to evacuate after geologists determined the mountain behind it was due to crash down on their houses and farms. And just last week, a massive landslide occurred and buried a mountain road, though the village itself has been spared, so far.

From Zurich, I could sense the emotion as dozens of families, some moved to tears, have had to leave a place where their roots run deep. As Swiss Re's chief risk officer, I can also appreciate authorities' sense of caution and urgency: Six years ago, a landslide on a peak just 60 kilometres away from Brienz killed eight and caused massive damage.

Clearly, risks – in Switzerland's unsettled mountains and the wider world – are a fact of life. Driven by complex, often interrelated factors like a changing climate, technological innovation and the shifting ground of geopolitics, they require us to effectively leverage our full array of risk knowledge to help us recognise hazards quickly, mitigate them and make needed adaptations.

Since the pandemic, big risks our industry has long modeled have materialised in rapid succession. Russia's war of aggression against Ukraine and related disruptions to energy and food supplies have all become an unfortunate reality of an increasingly fragmented world. Earthquakes in Turkey and Syria caused unspeakable loss of life, while the surface temperature of world oceans has reached a historical high, something experts warn may fuel extreme weather.

The Swiss Re Risk Management team that authored this year's SONAR, now in its 11th edition, has put identifying new emerging risks at the centre of their mission. A sampling of topics we tackle this year underscores why re/insurers must stay agile and proactive as they scan the horizon for future hazards – those that are known as well as those that are unknowable.

After COVID-19 exposed weaknesses in global disease defenses, our new SONAR serves as a reminder to insurers to implement learnings of the past three years so they're ready for all eventualities. It's sobering to think we're already in the midst of another vector-borne disease outbreak, the largest-ever wave of Avian influenza. The H5N1 bird flu has killed millions of birds, with the potential to jump from animals to humans.

Another SONAR emerging risk topic we can't ignore is generative Artificial Intelligence, which opens opportunities for underwriters and claims managers, potentially improving risk pricing or accelerating processes. Still, re/insurers must proceed carefully, as AI-generated medical guidance could impact health outcomes, while unintended introduction of bias could spawn lawsuits or reputational harm. SONAR also dives into the potential for advances like Machine Learning to fuel a wave of claims for toxic chemical contamination, as previously hidden connections between chemicals, environmental destruction, and personal injury may emerge.

I'm particularly interested in long-tail risks, the kind that may be neglected in the current hype of the moment, but which may accumulate to challenge us down the road. These include not only demographic developments, but also increased geopolitical fragmentation. As our 2023 SONAR points out, global economic division into regional blocs with exclusive markets would lay bare a host of interconnected friction points, stunting growth, boosting costs, and erecting barriers to cooperation needed for solving big problems that transcend borders.  

Above everything, our latest SONAR aims to inform and inspire conversations about emerging and often "slow-burn" risks posed by our unsettled world, so the insurance industry and its clients can continue to build societal resilience. It's a great conversation starter – one of the most important that Swiss Re produces as a company. To this end, we'll also hold a hybrid public event on 27 June, where we'll take a closer look at Digital Twins and the benefits and risks of this fusion of technologies due to help power the Fourth Industrial Revolution.

In the now-deserted Swiss village of Brienz, the warning signs had been visible for years: the town has been sliding toward the valley, a metre or more annually. The giant rocks regularly tumbled from the scarred mountainside behind the village into the surrounding fields were a harbinger of last week’s bigger slide; some time back, officials even installed a traffic signal, with a red light warning drivers of falling boulders. As geologists monitor the unstable situation, residents still can't return.

The historic record generated by calamities like this one unfolding in real-time in the Alps is valuable. It informs our mitigation thinking, even with respect to new emerging risks and their potential impact on individuals, families, and their communities. Still, the past alone is rarely sufficient to fully understand new, emerging risk phenomena.

To identify threats on or beyond the horizon, our emerging risk analysis must also be paired with the "scenario thinking" that is at the heart of SONAR. This helps us not only to better grasp the uncertainties that accompany emerging risks, but also to create flexible, long-term strategic plans to prevent them from gaining the upper hand so that the human costs of risk don't spiral out of control.