Climate change has surpassed technology as one of the main risks for insurers, according to the 2023 edition of the ‘Banana Skins’ report, prepared by PwC and the Center for Studies for Financial Innovation (CSFI) based on the opinion of 589 insurance industry executives.
Specifically, in the previous edition of the report, in 2021, the five risks for managers, in order of importance, were cybersecurity, regulation, technology, climate change and interest rates. In this year’s report, cybersecurity and regulation remain the main risks, while climate change is in third position; fourth, technology; and in fifth position, talent.
“Once the macroeconomic environment has stabilized, the agenda of the boards of directors of insurance companies will be marked, without a doubt, by the response to threats derived from technological innovation – where artificial intelligence will be disruptive -, security and obsolescence, and the effects of climate change, to which is added a regulatory avalanche on these issues,” underlined the partner responsible for PwC Insurance, Pedro Díaz-Lorente.
According to the professional services firm, the choice of cybercrime as the main threat reflects the widespread concern among managers in the sector about the impact that cyberattacks can have on the operations and continuity of their businesses, in relation to the theft of sensitive data. of clients and the reputation of their companies. In this sense, the managers surveyed have expressed their concern about the development of “more preferred” attacks through the use of Artificial Intelligence and the “high cost” for companies to respond to them.
Among the regulatory risks in the future, insurance companies highlight the Digital Operational Resilience Regulation (DORA), and the future Corporate Sustainability Reporting Directive (CSRD), whose compliance requires an investment and dedication of resources that worries managers. They consider that it could affect the capacity for innovation, the development of new products and, ultimately, the competitiveness of their companies.
The increase in natural tailors is worrying
Regarding climate change, the increase and severity of natural disasters is of concern. Likewise, the risks of carrying out a transition towards a low-carbon economy and the effects that this may have on asset valuations are also a source of concern.
The PwC report also includes managers’ perception of how they are prepared to face risks. On a scale from 1 (poorly) to 5 (well prepared), the average response of those interviewed was 3.20 points, below the 3.22 recorded in 2021. For PwC, this suggests a slight deterioration in trust that companies in the industry have to face the challenges that come.