Emerging Risk Signals in a Fragmenting Global Insurance Landscape

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Insurance has always been about anticipating uncertainty especially when that uncertainty evolves faster than traditional models can adapt. The SONAR 2025 report from Swiss Re Institute challenges actuaries to confront emerging risks before they crystallize into capital strain.

Emerging Risks In A Snapshot

Actuaries must stay alert to emerging risks because insurance is fundamentally about anticipating uncertainty before it becomes loss. By the time a risk is fully visible in historical data, pricing, reserving and capital decisions may already be outdated. Emerging risks such as technological disruption, climate shifts, social inflation or health trends can alter frequency, severity and correlation patterns in ways traditional models may not capture. Awareness allows actuaries to challenge assumptions early, adjust underwriting and capital strategies proactively, and protect both insurer solvency and policyholder trust.

If actuaries treat emerging risks as an annual reading exercise rather than a strategic mandate, we risk becoming backward-looking technicians in a forward-moving risk environment.

Each year, the Swiss Re Institute publishes its SONAR report¹ to identify early signals of risks that may not yet be fully visible in insurance portfolios but have the potential to become materially significant. This is one of the most authoritative resources on understanding emerging risks and their impact on the insurance industry. The 2025 edition continues this forward-looking tradition, scanning scientific research, legal developments, technological shifts, and social trends to highlight exposures that could reshape underwriting, pricing, and capital management in the coming years. Rather than offering predictions, SONAR provides a structured horizon scan, encouraging insurers to think beyond historical data and to engage with uncertainty before it crystallizes into loss.

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The key takeaways for the emerging risks given in SONAR are:

Emerging Risks Short-Term (up to 3 years):

• Extreme heat and the insurance fallouts: Rising frequency and severity of heatwaves increase health impacts, property stress, wildfires, infrastructure damage and related insurance losses across multiple lines. If mortality assumptions are updated only after multiple years of excess heat-related claims, reserve strengthening becomes reactive rather than anticipatory. That lag carries solvency implications.

• Deepfakes, disinformation and AI amplify insurance fraud: Digital deception and manipulated content heighten the potential for sophisticated fraud schemes, increasing operational and liability claims.

• New frontiers in fungi-related loss potential: Warmer conditions support fungal growth and resistance, creating property, agricultural and health exposure that may lead to coverage claims.

• Challenges from adaptation to new technologies in healthcare: Healthcare tech advancements carry risks related to cybersecurity, privacy and liability from technological failures or misuse.

• The expanding horizons of drone technology: Wider and more complex drone use introduces operational, liability and regulatory risk with potential insurance payouts.

Emerging Risks Medium-Term (beyond 3 years):

• Plastics: a new wave of litigation? Environmental and health concerns linked to plastics could trigger liability lawsuits, regulatory action and insurance implications.

• Emerging workforce and skill-set shortages challenge insurers: Demographic shifts and rapid technological change create people and skills gaps, with potential impacts on claims handling and operational resilience.

• Ultra-processed foods and health and liability risks: Research connecting high consumption of ultra-processed foods to chronic disease could lead to increased health claims and product liability litigation.

Most-Affected Business Areas of insurance (by emerging risks) by impact are:

• Property lines

• Specialty lines

• Casualty

• Life & Health

• Financial markets (including insurer assets)

• Operations (including regulatory changes)

The key structural risks affecting the Insurance Industry are:

• Declining consumer trust in institutions, including insurers; rising reputational risk.

• Excess mortality variance introduces uncertainty for life & health claims and reserves.

• Digital technology liabilities increase operational and cyber exposures.

• Social inflation may expand liability claims beyond economic drivers.

• Ageing populations pressure mortality protection products and long-term care demand.

Implications For Actuaries

There are clear implications that actuaries need to incorporate emerging risks instead of dismissing them as immaterial small items in current present and past. Pricing and Reserving must incorporate Non-Linear Risk. Heatwaves, social inflation and biological shifts introduce correlation structures that traditional historical triangles may not capture. Actuaries must stress-test severity assumptions under forward-looking climate and litigation scenarios rather than relying solely on backward experience. Model Risk Governance must also expand. AI-driven fraud and digital health liabilities require actuaries to understand algorithmic risk, cyber accumulation, and model drift. The traditional separation between actuarial modelling and operational risk is narrowing.

Capital Management must also become adaptive. Structural risks such as mortality volatility and litigation waves require dynamic capital buffers and scenario-based solvency planning. Static capital calibration based on historical volatility may understate tail risk.

What Actuaries should do now, given these implications:

• Integrate emerging risk scenarios into ORSA and capital stress testing rather than treating them as qualitative notes

• Challenge reliance on purely historical triangles in lines exposed to climate and litigation acceleration

• Collaborate with underwriting and claims teams to detect early shifts in frequency and severity drivers

• Develop literacy in AI-related operational and fraud risks that intersect with pricing and reserving

Better Evolvers Not Predictors

Emerging risk analysis reminds actuaries that our role is not to predict the future with certainty but to evolve with it intelligently. The objective is not perfect foresight, but preparedness. By scanning weak signals, stress-testing assumptions, and considering how trends could reshape loss patterns or correlations, we build adaptability into pricing, reserving and capital management. In that sense, emerging risk work makes us better evolvers rather than bold predictors, strengthening resilience in an uncertain world. The profession cannot afford intellectual comfort. If emerging risks reshape loss distributions faster than model updates, actuarial relevance erodes.

Workforce dynamics further complicate the emerging risk landscape. Aging populations and skill shortages in critical sectors such as healthcare, infrastructure maintenance, and high-hazard industries can elevate accident frequency and operational error rates. Reduced institutional knowledge and stretched human resources may amplify safety risks, affecting casualty and liability lines. Simultaneously, the insurance industry itself faces talent constraints, which may hinder its capacity to evaluate increasingly complex exposures. The interplay between demographic change and technological acceleration creates systemic fragility that traditional actuarial models may not fully capture.

Structural Forces Shaping The Risk Horizon

Beyond individual emerging signals, social inflation remains a significant concern, particularly in casualty lines. Expanding legal interpretations of liability, rising jury awards, and litigation funding mechanisms are increasing claims severity. When emerging scientific debates around plastics or food-related health impacts intersect with aggressive litigation environments, the financial consequences can escalate rapidly. Insurers must therefore monitor not only the evolution of risk drivers but also the legal and social frameworks that determine how those risks materialize.

Trust and institutional confidence also play a critical role. Declining public trust in corporations and governments can intensify reputational risk and accelerate regulatory intervention. In a low-trust environment, insurers may face increased scrutiny regarding underwriting decisions, claims handling, and investment practices. Public perception can influence policy uptake and shape regulatory agendas, thereby altering the operating environment even before losses occur.

Demographic transitions add further uncertainty. Aging populations increase healthcare utilization and pension liabilities, while recent volatility in mortality trends has challenged traditional life insurance assumptions. Excess mortality patterns influenced by pandemics, climate stressors, and lifestyle changes introduce unpredictability into actuarial projections. At the same time, rapid digital transformation is reshaping distribution channels, customer expectations, and operational risk profiles. These structural shifts do not operate independently; they interact with emerging risk signals, amplifying their potential impact.

Conclusion

The central message we should be aware of that catastrophe is inevitable, but vigilance is essential. Emerging risks rarely arrive fully formed. They develop gradually, often at the margins of current models, until a tipping point forces recognition. For insurers, the ability to identify weak signals early and integrate them into scenario planning, stress testing, and strategic decision-making is a competitive advantage. Horizon scanning must be complemented by flexible capital management and adaptive underwriting frameworks capable of responding to evolving evidence.

In an increasingly interconnected world, risk cannot be understood in isolation. Climate, biology, technology, law, and demographics form a complex web where change in one domain reverberates across others. By embracing anticipatory thinking rather than reactive response, insurers can strengthen resilience not only within their portfolios but across the communities they support.

The next major loss event will not announce itself in advance. It will emerge from signals we are already seeing. Actuaries who engage with emerging risks early will shape the future of the profession. Those who wait for full credibility in the data will always be one loss cycle behind.

¹  https://www.swissre.com/institute/research/sonar/sonar2025.html 

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