September 2019

The Changing Nature of Risk

The global risk landscape is changing rapidly. Cursory glances at studies conducted over the last decade on the risks that have commandeered businesses’ and (re)insurers’ agendas show that economic concerns dominated 10 years ago (at the height of the financial crisis) while technology, extreme weather and climate change prevail today. The last two factors in particular should come as no surprise given the number of catastrophes that devastated communities worldwide in 2017 and 2018.

Based on recent market behaviors, a more sophisticated and tailored approach to renewals is likely to prevail over the volatile and often indiscriminate reinsurance rate movements of the past, as reinsurers scrutinize cedents’ performance and loss experiences and allocate capacity accordingly. By working closely with their reinsurance and intermediary partners, insurers can minimize earnings volatility, reduce capital requirements, improve solvency and, ultimately, innovate and grow — crucial attributes when looking to manage and prosper in an increasingly complex risk environment.

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