Howden Re, the reinsurance and risk advisory arm of Howden, the global insurance intermediary, yesterday released a report titled "Beyond the horizon: shaping the future of risk", which underscores the imperative for industry collaboration in developing innovative solutions in response to rapidly changing natural catastrophe, political violence and casualty (re)insurance landscapes.
As the global (re)insurance sector faces unprecedented challenges, the report outlines strategic approaches that will be critical in navigating the next phase of the industry's cycle.
Industry context and the need for innovation
From unprecedented natural catastrophes fuelled, in part, by climate change, to geopolitical tensions and economic volatility, the report discusses evolving perils that are not only more complex but also increasingly interconnected and severe. Traditional risk management models are being tested and the industry must adapt to meet these new demands and challenges.
Key findings
The report highlights three core areas reshaping the (re)insurance industry and requiring immediate attention:
When it rains, it pours – rising natural catastrophe losses in Europe: Recent European flood events and severe hailstorms in Italy have significantly impacted insured losses, driven by shifting climate patterns and increasing exposure in vulnerable regions. For example, the 2024 floods in Bavaria and the unprecedented hailstorms in the Po Valley in 2023 underscore the need for the (re)insurance sector to develop tailored products and solutions that address both ‘peak’ and ‘non-peak’ perils. The report proposes specific strategies to mitigate these risks, including enhanced flood protection infrastructure and exposure management tools to prevent hail damage.
A world of trouble - emerging geopolitical risks: Beyond natural disasters, the report identifies a broader array of risks, including the rise in strike, riot, and civil commotion (SRCC) events, as well as political violence (PV). These threats are becoming more frequent and severe, and though a global issue, the risks are particularly heightened in regions with increased political instability. The report examines recent incidents in markets such as South Africa and New Caledonia, proposing advanced modelling techniques and innovative risk transfer solutions to manage these complex exposures.
Casualty concerns: The report also addresses challenges in casualty lines, particularly in relation to growing liabilities associated with persistent pollutants like PFAS (per- and polyfluoroalkyl substances), and the evolving risks in the motor market driven by the adoption of autonomous vehicles. These emerging issues require the industry to rethink traditional reserving strategies, and to adopt more granular approaches to manage long-tail liabilities.
Mr David Flandro, head of Industry Analysis and Strategic Advisory at Howden Re, underscored the urgency of addressing these challenges, saying, “The risks we are encountering today are more interconnected and severe than ever before, requiring new ways of approaching risk management. Bespoke solutions are needed, tailored to the unique challenges faced by different regions and lines of business worldwide.”
Outlook
The report offers a forward-looking perspective on the industry's trajectory, suggesting that the future of the (re)insurance market will be characterised by a greater emphasis on resilience, adaptability, and innovation. The ability to anticipate and respond to evolving threats will be critical in sustaining market stability and growth.
Howden is a leading global insurance intermediary group with employee ownership at its heart. Founded in 1994, it operates in 55 countries across Europe, Africa, Asia, the Middle East, Latin America, the USA, Australia, and New Zealand, employing 18,000 people and handling $38bn of premiums on behalf of clients.