Two trends top risks for clients, insurers

Client coverage may be inadequate to meet emerging risks on two key fronts

Climate change and large-scale forced migration are the greatest risks facing the world according to a survey by the World Economic Forum, the organizer of next week’s meeting in Davos.
The 2016 report, published Thursday, highlighted the most significant threats expected over the next decade, based on a survey of more than 750 experts. Not dealing with climate change is seen as the risk with the greatest potential impact, ahead of weapons of mass destruction and water crises in second and third place. Migration tops the list in terms of likelihood.
“Climate change is exacerbating more risks than ever before in terms of water crises, food shortages, constrained economic growth, weaker societal cohesion and increased security risks,” Cecilia Reyes, chief risk officer at Zurich Insurance Group AG, said in a statement. “Meanwhile, geopolitical instability is exposing businesses to canceled projects, revoked licenses, interrupted production, damaged assets and restricted movement of funds across borders. These political conflicts are in turn making the challenge of climate change all the more insurmountable.”

‘Mitigation, Adaption’
The report, which is in its 11th year, shows a broader range of risks than ever before, the WEF said, with environmental, geopolitical, societal and economic threats all featuring in the top five in terms of impact for the first time. There is also evidence of increased connections between risks as they feed off each other, the report said.
“We know climate change is exacerbating other risks such as migration and security, but these are by no means the only interconnections that are rapidly evolving to impact societies, often in unpredictable ways,” said Margareta Drzeniek-Hanouz, the WEF’s head of global competitiveness and risks. “Mitigation measures against such risks are important, but adaptation is vital.”
The list of most likely risks, topped by “large-scale involuntary migration,” continues with extreme weather events in second place, failure to tackle climate change in third and interstate conflict, which topped last year’s list, in fourth. The highest ranking for a technological risk was cyber-attack, which came in 11th place for both likelihood and impact, though it was seen as the greatest risk to doing business in North America.
“Events such as Europe’s refugee crisis and terrorist attacks have raised global political instability to its highest level since the Cold War,” said John Drzik, president of Global Risk and Specialties at Marsh LLC. “The need for business leaders to consider the implications of these risks on their firm’s footprint, reputation and supply chain has never been more pressing.”
Bloomberg 2016


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