4 Global Threats … 4 Insurance Opportunities: Emerging Risks by the Numbers Michael Sauber, VP, Marketing | Feb 27, 2020

Complex Commercial Insurance Systems

This week, we received a wake-up call. A worldwide pandemic is no longer just the stuff of Hollywood movies. It’s no longer a matter of “if”, say experts, but “when”.

But a possible pandemic is just one of a series of alarming news headlines that highlight the changing makeup of risk. Cyber, climate change, water scarcity — these emerging risks, along with pandemics, have far-reaching consequences. And while the damage they cause is painful, they present new opportunities for insurers.

In this post, we highlight four of the most prominent emerging risks and their implications for commercial programs and Complex Commercial insurance.

Epidemic or Pandemic: Does it Matter?

The coronavirus outbreak is not the latest. 2003’s SARS epidemic lasted eight months and disappeared, but the outcome for COVID-19 is still uncertain. On Tuesday (February 25, 2020), the U.S. Centers for Disease Control (CDC) warned Americans to prepare for a “significant disruption”.1 The worldwide economic toll is only beginning to unfold:

  • The coronavirus is expected to cost the US travel industry more than $10 billion over the next four years, with more than half of that loss coming in 2020.2
  • Auto sales in China, the world’s biggest car market, dropped 92 percent in the first half of February compared to the same period last year.3
  • Proctor & Gamble said supply and demand disruptions will materially affect the company’s quarterly results. China is the company’s second-largest market and contains 387 of its suppliers, each struggling to resume operations.

Cyber Risk Rising

Cyber risks are expanding, affecting an ever-larger number of firms of all sizes each year. The following is a sample of findings from the 2019 Hiscox Cyber Readiness Report4:

  • Sixty-one percent of firms suffered a cyber attack in 2019, compared to 41 percent the prior year.
  • The median cost for cyber losses jumped from $229,000 to $369,000 last year – a 61% increase.
  • Almost two-thirds (65%) of firms experienced a cyber-related supply chain issue last year.

Climate Change: The Warmest Winter on Record

Businesses are preparing for the effects of climate change on their bottom lines, according to a recent report from CDP (formerly, the Carbon Disclosure Project).5 The study covered more than 7,000 companies worldwide. And their fears may be justified. With just a few weeks to go, we’re headed toward the warmest winter ever recorded.6 Here are some of the report’s key findings:

  • 215 of the world’s 500 biggest companies face $1 trillion in climate-related costs – the majority of these in the next five years – unless they take measures to prepare.
  • The world’s largest companies estimate at least $250 billion of assets may need to be written off or retired early as the planet heats up.
  • In January last year, Pacific Gas and Electric filed for bankruptcy as it faced up to $30 billion in fire-related liabilities after its power lines sparked California’s deadliest wildfire.

Water Scarcity: Longer-Term But No Less Devastating

The looming U.S. water crisis is much less visible but no less serious than the previously mentioned risks. In fact, the World Economic Forum lists water crisis as the fourth most serious global risk7, trailing only weapons of mass destruction, failure to adapt to climate change, and extreme weather events. Here are some of the facts:

  • Water service has been cut off to an estimated 1.4 million people living in more than a half-million American households as climate threats to the levels of major bodies of water like the Colorado River and Lake Mead drive up water bills.
  • U.S. agriculture, which accounts for 75% of annual consumption from the country’s 204 freshwater basins, will likely face serious shortages in 96 of those.
  • In Iowa, 300,000 private wells used for drinking water faced extensive contamination in 2019 due to agricultural practices, including the use of ion nitrate fertilizer.

What Does It All Mean for Commercial Insurers?

Policyholders are concerned their insurance coverage is insufficient for emerging risks, according to The World Insurance Report 20198. And insurers appear to be less ready to adapt than their customers. Over half of customers said they are ready to explore new insurance models, but barely a quarter of insurers are investing in them.

For insurers, emerging risks present opportunities to grow by creating new, more relevant products. Flexible systems that can quickly and easily accommodate new coverages and incorporate new bureau updates will be key.    

According to Patrick Raaflaub, Swiss Re’s Group Chief Risk Officer, “ignoring emerging risks is not an option, either for political decision-makers, the insurance industry, or society as a whole. “The earlier we adapt to these changes, the better prepared we’ll be.”9 


1      Winsor, Schumaker, and Nathanson. CDC warns Americans of ‘significant disruption’ from coronavirus. ABC News. Feb 25, 2020.
2      Slotnick, David. The coronavirus is slamming the US travel industry, with experts predicting it will wipe out more than $10 billion in spending from Chinese visitors. Business Insider. Feb 18, 2020.
3      Coronavirus Outbreak Deepens Its Toll on Global Business. The New York Times. Feb 21, 2020.
4      Cybersecurity Firms See Increase in Cyber Attacks. Security magazine. Jul 8, 2019.
5      Plumer, Brad. Companies See Climate Change hitting Their Bottom Lines in the Next 5 Years. The New York Times. Jun 4, 2019.
6      Sullivan, Brian K. It’s the Warmest Winter Ever and It’s the North Pole’s Fault. Bloomberg. Feb 21, 2020.
7      Sterea, Andreea. The Looming U.S. Water Crisis. Common Dreams. Dec 19, 2019.
8      World Insurance Report 2019. Capgemini and Efma. May 14, 2019.
9      Heft, Jayleen R. 18 emerging risks for the insurance industry, its customers and society at large. Property Casualty 360. Jun 29, 2017.

Mike Sauber joined Instec in 2016, with over 30 years of experience in technology marketing and sales. Mike has led global marketing teams and programs at IBM, Unisys, and Data General, among others, and prior to Instec was a member of the teams that launched two new enterprise software ventures. His deep technology industry experience includes software, servers, printers, and services, with an exclusive focus on the insurance industry since 2011. Mike holds an MBA from the University of Pennsylvania (The Wharton School), and a BES (Architecture) from the University of Waterloo.