In this market, a confident macro view can age badly in a matter of days. What looks like a settled outlook on a Friday morning can be upended by a new geopolitical shock before the weekend is over – and suddenly the issue you thought was fading is front and centre again. That kind of whiplash is slowly becoming the norm, and it is forcing insurers to rethink how they plan.
Chris Cornell (pictured right), partner and national sector leader, insurance at KPMG Canada, argues that the sector has had no choice but to get better – and faster – at scenario planning.
“I think it starts with, we’re getting really good at it,” he says. “Things have been changing so quickly, and everything’s been moving.” Over the past 18 months alone, insurers have had to navigate shifting interest rates, persistent inflation, tariffs, geopolitical shocks and supply chain disruption – sometimes all at once. In that environment, running “what if?” scenarios can’t be an annual strategy exercise; it has to become muscle memory.
Cornell points to KPMG’s CEO research, which suggests that nearly four in five insurance leaders are now more confident about industry growth, precisely because they’re getting “multiple pieces of information around scenario planning” and treating it as a business‑as‑usual discipline. That confidence, he stresses, doesn’t mean they expect the world to become any less volatile. It reflects a belief that their organisations are better equipped to understand and manage that volatility than they were even a few years ago.
Insurers, after all, are in the business of risk. Compared with many other sectors, Cornell says, they are structurally better prepared to assess complex threats and build them into their models – particularly as they lean more into AI and advanced analytics.
“They’re probably better prepared than other industries in terms of being able to assess what these risks are, and they have more sophisticated modelling capabilities in order to be able to do that,” he says. “It’s never going to be perfect, but the industry is well-positioned to address these risks as we move forward.”
Jonathan Weir (pictured left), a partner at KPMG focused on the insurance sector, has seen that shift first‑hand in conversations his firm has facilitated with Canadian insurance executive teams. Drawing on KPMG’s geopolitical and macro‑economic specialists, those sessions dig into possible futures and how they might ripple through insurers’ businesses.
What stands out to Weir is the growing depth and specificity of those discussions. Leadership teams aren’t just asking whether a given scenario is “good” or “bad” for the industry; they’re mapping out which steps they can take upstream to influence the outcome, and how many steps downstream they need to look to understand knock‑on effects for customers, capital and balance sheets.
One CFO, he recalls, described a series of very deliberate balance sheet moves aimed at improving the company’s resilience in anticipation of greater uncertainty. The trigger wasn’t something happening in Canada, but a build‑up of geopolitical and economic risk elsewhere that could, in time, wash up on Canadian shores.
When Cornell is asked what will matter most for insurers by year‑end – inflation, cost pressures, war, supply chain disruption or tariffs – he doesn’t hesitate.
“I think it’s the answer selection of the multiple choice of ‘E: all of the above’,” he says.
What matters just as much, in his view, is how insurers respond operationally. Looking ahead, he sees four priorities rising to the top of executive agendas.
The first is maintaining an intense focus on the customer. In practical terms, that means continuing to advance digital capabilities and making sure policyholders are served “in the right fashion” across channels, even as the cost environment deteriorates. Inflation‑proofing input costs and building financial resilience come a close second – boards and regulators alike are scrutinising how well carriers can withstand continued pricing and claims pressure.
Third is the impact of AI on the business. Cornell sees no shortage of experimentation – proofs of concept in underwriting, claims, customer service and climate modelling are already underway at many carriers – but the real challenge now is embedding those capabilities across the organisation and extracting tangible ROI.
“We see a lot of proof of concepts, or work that’s happening throughout organizations right now, but they want to really embed that in order to get ROI from the implementation of AI,” he says. That will matter not just for efficiency, but for the more sophisticated modelling that will be needed to navigate the next wave of shocks.
The fourth plank is talent. As insurers broaden their use of AI and strengthen their risk and resilience capabilities, they need people who can bridge actuarial, data science, technology and business. Attracting and retaining that mix is becoming a strategic concern in its own right.
Weir agrees with Cornell that the seemingly disparate threats insurers face are, in reality, tightly interconnected. Inflation, supply chain disruption and geopolitics, for example, all ultimately show up as cost and volatility in insurers’ books – and in their customers’ premiums.
“The inflationary effects will take some time to work their way through, and they’ll be quite persistent for a while,” he says. “That means those costs have to be balanced out throughout the system. So what does that mean for customers? How are we going to manage that situation best for customers?”
For Weir, the answer lies in continuing to invest, even – or especially – when conditions are tough. Insurers that keep putting money into digitisation, AI and customer experience will be better placed to explain what’s happening, soften the blow where possible and deliver a clearer sense of value.
“If you don’t continue to invest in your business, and you don’t think about digitisation, leveraging AI, and think about the customer experience, you’re going to be trying to force through your costs into premium without effectively improving the experience or improving the value proposition for customers,” he warns. “That’s just going to be a competitive disadvantage in the market when everyone’s going to have the same drivers of costs on their hands.”
