Climate, crypto and quantum computing altering emerging risk landscape

In a world where climate change is altering the substance of our physical environment, and new technologies are upending established norms, emerging risks are presenting novel challenges for businesses and insurers.

As the global risk community deals with known risks, a new report calls attention to the less familiar emerging risks landscape.

Swiss Re’s tenth annual SONAR report of the risk horizon shows crypto assets and quantum computing creating new risks within the global financial system. Cryptocurrencies have established themselves as potential challengers to conventional currencies. Alongside these new forms of currency, further crypto assets have emerged. Tokens, for instance, allow people to buy digital representations of real assets such as art works or real estate. They can be traded and grant their owner access to assets, products or services. The fluid ownership, taxation, regulatory issues and other risks related to the new asset classes present insurers with fresh challenges – such as whether certain crypto assets are implicitly covered by existing property or cyber policies.

The security of the new digital financial economy is also facing new risks. With quantum computing, for example, a new generation of computers is on the verge of completing tasks far beyond the reach of current machines, offering sophisticated weather modelling, advanced medical research capabilities and financial analysis. But with this increasing maturity comes threats to existing IT-security protocols, potentially hacking standard encryption keys used in online communications and data transfer.

Climate change meanwhlie creates a new generation of emerging risks. Swiss Re has long been consicous of the threat of climate change, identifying it as far back as 1979. Its latest reports explores how the thawing of permafrost, which covers a quarter of the northern hemisphere, could not only damage infrastructure and accelerate climate hazards but also release disease-carrying pathogens that have been frozen for decades.

Agriculture is especially susceptible to climate change – yet it is also an area that is struggling to reduce its contribution to global warming. Emissions from global food production account for about 31% of total man-made carbon emissions. The challenge for agriculture is to improve productivity and feed more people while cutting emissions at the same time.

Insurers have a role to play here, helping to scale up sustainable farming practices by offering suitable coverage solutions and facilitating climate-smart and regenerative agriculture.

Commenting on the research, Patrick Raaflaub, group chief risk officer at Swiss Re, said: "A global pandemic, geopolitical conflicts, surging inflation and an unstoppable climate crisis – these are just some of the many risks that SONAR has examined over the past decade that have ultimately materialised. However, researching new risks is not about forecasting. It is about raising awareness of risks that may impact society and preparing ourselves accordingly."

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Deborah Ritchie speaks to Chief Inspector Tracy Mortimer of the Specialist Operations Planning Unit in Greater Manchester Police's Civil Contingencies and Resilience Unit; Inspector Darren Spurgeon, AtHoc lead at Greater Manchester Police; and Chris Ullah, Solutions Expert at BlackBerry AtHoc, and himself a former Police Superintendent. For more information click here

Modelling and measuring transition and physical risks
CIR's editor, Deborah Ritchie speaks with Giorgio Baldasarri, global head of the Analytical Innovation & Development Group at S&P Global Market Intelligence; and James McMahon, CEO of The Climate Service, a S&P Global company. April 2023