World - Beyond the virus: new risks emerge as world changes
Coronavirus upheavals may have turned the world upside down in the past few months but Swiss Re’s Sonar report finds new technologies and the shift toward lower-carbon solutions remain key drivers of emerging risks.
“At the beginning of the year, the political agenda and discussion in media was dominated by climate change,” Swiss Re CRO Patrick Raaflaub says.
“Attention then shifted to COVID-19. Nevertheless, adaptation to climate risks and the transition to a low-carbon economy with related opportunities and risks for the insurance industry remain crucial.”
Swiss Re says the current crisis shouldn’t overshadow the need for the world to move to a more sustainable economy, and the insurance industry can help with the transition, while keeping an eye on the risks.
The firm’s latest annual Sonar report identifies carbon removal and insurance as the top emerging risk theme for property lines, while for casualty it’s risks from lithium-ion batteries.
Swiss Re says carbon removal is required, as well as emissions reduction, to reach targets for limiting global warming, but the industry is still in its infancy and risks from different approaches still have to be evaluated.
“By 2050 billions of tons of CO2 will need to be stored. The front-runners among insurers will profit from experience gathered over the next decade,” the report says.
Light, high performing, cost-efficient batteries to store electricity are vital for mobile devices and also to transition to a low-carbon economy.
But fire hazards associated with lithium-ion batteries (LIBs) span their value chain, starting at cell production facilities. In January a wrongly declared cargo of LIBs led to a container ship fire.
Swiss Re says unexpected product defects are a particular concern as the batteries become more widely used, increasing the potential for both property and liability claims.
Growth in environmentally friendly buildings, using new production techniques and materials pose challenges, while emerging hydrogen fuel cell technology is developing rapidly.
“The hydrogen fuel sector has the potential to progress the transition to low-carbon economies,” Swiss Re says. “To support this development, insurers will need to fully assess the safety risks when underwriting hydrogen-cell powered vehicles and facilities.”