The annual AXA Future Risks report offers a snapshot of the challenges facing risk managers and the brokers who support them. The top three challenges identified – climate change, geopolitical instability and cyber security concerns – reflect what Elie Hanna (pictured) is hearing as chief distribution officer for AXA XL UK & Lloyd's.
While these top risks have remained static for a while, other emerging risks are now gaining momentum, with AI and big data becoming more prevalent concerns for risk management professionals. “There’s also a lot of social tensions across the globe, which creates challenges, especially for multinational organisations operating across various markets,” he said. “If you look at 2024 from a loss perspective, you know [the risk environment] is continually evolving. Last year was the third-largest cat loss on record, with close to $140 million in terms of economic loss. And the cost of cybercrime is also continuously growing at a fast pace, with losses increasing in terms of both frequency and severity.”
All of these elements, and the way they increasingly interplay with each other, are of concern for risk leaders, and underpinning these concerns is a sense of greater overall instability. This is being reflected in changing discussions about supply chain issues, he said, not least because there is growing recognition that they need to be addressed and resolved quickly in order to minimise their knock-on impact.
Another area of consideration is around regulatory changes because regulation is continually evolving, and risk management professionals know they need to stay ahead of changes in market dynamics. “That requires risk managers to stay updated, and for them to invest more time and more resources on their side,” he said.
Hanna emphasised the blend of external and internal considerations underpinning today’s risk environment, with changes to technology offering an example of both at once. New technologies can help organisations to offset a lot of the challenges they’re facing, he said, but they do come with their own risk. Globalisation has meant that markets are now all very connected, but this connectivity means that risks which originate in one place can have consequences beyond that single location.
Meanwhile, climate change and natural disasters are increasingly affecting businesses’ operations, which is further complicated by this interconnectivity piece. He said: “There is growing pressure from stakeholders, including investors, customers and regulators for greater transparency and accountability in risk management practices.”
In the context of this interconnected risk environment, Hanna highlighted several ways in which brokers are looking for support to more effectively serve their clients. They include support in terms of navigating the emerging transition, mitigating geopolitical concerns, and finding new ways to fight cyber security exposures.
Despite the shared perspective on risk offered by such reports, Hanna emphasised the importance of insurance and risk management partners maintaining a view of the unique risk profile of their clients. Every client has different needs, and so requires customisation of both their risk transfer and their risk management products and services.
“The insurance industry has plenty of data in different segments, and I think that, as an industry, we could use more of that data to support our customers in the journey,” he said. “We can use more of that data for understanding their risks but also in sharing our expert perspective and our ability to continuously assess emerging risks – and so educate them on some of the things that are happening.” What it essentially comes down to, he said, is that the industry has a wealth of data that could be useful to its clients, and it needs to explore new ways to use this data in order to work more closely and efficiently with its clients.
Sharing his advice on how insurance and risk management companies can better support their brokers – and in doing so, their end clients – in today’s complex environment, Hanna suggested strong broker partnerships are key to creating a healthy and sustainable marketplace.
“A lot of the coordination of what we offer to clients happens through the brokers, and we’ve seen brokers being very willing to foster a strong tripartite relationship to make sure their clients are getting the right outcomes,” he said. “It comes back to having a very open and transparent relationship because, as risks evolve and change, clients will face challenges they have not faced in the past. And as a result, the need for tripartite partnerships is probably far stronger than it used to be.”
