Insurance: Technology and Emerging Risk Management

Society is facing a growing number of new and evolving risks, commonly referred to as emerging risks. These include climate change, pandemics, the deterioration of mental health, and the rapid digitalization of many aspects of our lives and economies. Such risks represent a major challenge not only for society as a whole, but also for insurers and reinsurers.

This session brings together Sarah Hartmann, Legal Counsel at the ACA (Association of Insurance and Reinsurance Companies), and Cédric Mauny, Head of Cybersecurity Services at Proximus NXT, to discuss how technology is reshaping risk management and the insurance industry.

Understanding Emerging Risks

To ensure long-term sustainability, every organization must identify the risks it faces and implement measures to reduce them to an acceptable level based on its own risk tolerance.

Insurance companies play a critical role in this process by providing solutions to cover residual risks and protect individuals and businesses against potentially devastating events. However, today's environment is characterized by increasing uncertainty, requiring insurers and organizations alike to address a growing range of emerging threats.

As Sarah Hartmann explains:

"Emerging risks stem either from newly identified hazards or from existing hazards that have so far received little attention, or whose potential impacts have increased significantly or evolved unexpectedly. Although these risks are often difficult to assess, they have the potential to cause substantial harm."

A New Generation of Risks

Emerging risks take many different forms.

The COVID-19 pandemic brought pandemic risk back to the forefront of global concerns. Climate-related disasters—including floods and wildfires—have made the consequences of climate change increasingly tangible. Other significant challenges include growing geopolitical instability, the deterioration of mental health, and the rapid adoption of artificial intelligence.

Among these, cyber risk has become one of the most pressing concerns as organizations become increasingly dependent on digital technologies.

According to Sarah Hartmann:

"Insurers and reinsurers are directly affected by these risks. Like any organization, they are exposed to them. At the same time, they play a central role in protecting society by anticipating, assessing, and compensating for damages. To ensure effective risk coverage, these risks must be properly evaluated—a task that is becoming increasingly complex."

She highlights the example of flooding in Luxembourg, where what was once considered a once-in-a-century event is now expected by some experts to occur approximately every 30 years.

As the representative body of Luxembourg's insurance and reinsurance sector, the ACA promotes dialogue among its members while raising awareness of emerging risks among businesses and the general public.

Cyber Risk: An Emerging Yet Long-Standing Threat

Although cyber risk is often categorized as an emerging risk, it is not a new one. Rather, its importance has grown alongside society's increasing reliance on digital technologies.

The widespread adoption of remote working during the COVID-19 pandemic clearly demonstrated how dependent organizations have become on digital infrastructure. While technology enabled business continuity, it also created new opportunities for cybercriminals.

As Cédric Mauny explains:

"Cyber risk is considered emerging not because it is new, but because it continues to grow as society becomes increasingly digital. Technology creates tremendous opportunities, but every organization must strengthen its resilience against the threats that accompany digital transformation."

Building Resilience Through Risk Management

Recent years have also seen cybercriminals become significantly more organized and professional, making preparation more important than ever.

According to Cédric Mauny, organizations should adopt a risk-based approach by identifying cyber threats, evaluating their potential impact, and implementing appropriate mitigation measures.

Since so many essential services now depend on digital technologies, risk scenarios must continuously evolve to reflect this new reality.

Understand, Reduce and Transfer Risk

Managing emerging risks requires a combination of prevention, governance, technology and insurance.

Organizations can improve their resilience by:

• deploying advanced cybersecurity solutions;
• performing regular data backups;
• carefully selecting trusted partners;
• strengthening governance and risk management processes;
• increasing employee awareness and cybersecurity training;
• developing comprehensive business continuity and incident response plans.

As Cédric Mauny notes:

"Organizations must prepare for multiple scenarios, including those that seem highly unlikely. Recent crises, including COVID-19, have shown that the unimaginable can happen."

T

echnology as an Enabler for Better Risk Assessment

While it is impossible to anticipate every emerging risk, awareness is the essential first step.

As Cédric Mauny emphasizes:

"Understanding the risks allows organizations to anticipate them and implement measures proportionate to their potential impact on employees, customers, partners and the broader ecosystem."

For insurers, encouraging prevention and helping clients reduce their exposure to risk remain fundamental objectives.

Sarah Hartmann concludes:

"Risk is at the very heart of the insurance business. Insurance has a crucial role to play in addressing emerging risks. Although cyber threats and climate-related risks represent significant challenges, they also create opportunities for innovation. Prevention remains essential. Every day, we work to help our clients understand these new threats and reduce their exposure."

Technology itself is also becoming a powerful tool for insurers.

Digital technologies enable insurers to analyze far more data than ever before, improve risk modelling, better estimate the probability of future events, and ultimately develop insurance products tailored to the evolving needs of different customer segments.

Combined with traditional actuarial methods, technological innovation is becoming one of the key drivers in helping society better understand, anticipate and insure against cyber risks, climate risks and the next generation of emerging threats.