Aon Benfield identifies seven emerging risk opportunities for insurance growth

Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc, has identified seven emerging risks that present re/insurers with business opportunities over the next five to 10 years: United States mortgage credit, the sharing economy, reputation and brand, microinsurance, corporate liability covers, terrorism cover and cyber risk.

Speaking at Aon Benfield’s 14th Biennial Hazards Conference in Australia on Tuesday, Stephen Mildenhall, CEO of Aon Analytics, will describe how a history of successful risk management has dampened demand for existing risk products, amid declining frequencies in road fatalities, property fires and medical professional liability payments in many countries over the past decade. [click image below to enlarge]

However, developments in the global economy provide an opportunity for insurers through new areas of emerging risks, Aon Benfield said in a press release on Monday. “Many of the emerging risks identied by the firm’s Global Insurance Market Opportunities report include exposures that are intangible, yet nonetheless can have a considerable impact on balance sheets, income statements and shareholder value,” the press release said.

“Change is bringing new, emerging risk types, offering new opportunities for the insurance industry,” the report added. “At the same time, the industry has seen an influx of non-traditional capital as well as new enabling data, technology, and analytics capabilities. Taken together, favourable developments in all three strands of the market – demand driven by new risks, supply from new capital, and empowering data and analytics – make the outlook for the coming decade very bright.”

The seven key emerging risks identified by the report (opportunities over the next five to ten years) consist of the following:

• U.S. mortgage credit: an opportunity for US$6 billion of reinsurance limit annually;

• Sharing economy: with individuals renting out personal assets for money in direct competition with established businesses like hotels and taxis, coverage gaps highlight an immediate opportunity for re/insurers to offer policies which span personal and commercial exposures;

• Reputation and brand: the #1 risk identified by the 2015 Aon Global Risk Management Survey.

• Microinsurance: offering access to four billion potential new customers, and with opportunities for long-term growth as developing economies gradually become more affluent;

• Corporate liability: opportunities for re/insurers to provide cover for giga losses, which require more than US$1 billion of reinsurance limit;

• Terrorism: leveraging military-based technology to better understand this risk and improve model competencies, such as accounting for factors that mitigate blast zone damage; and

• Cyber risk: as data and analytics improve, Aon forecasts that cyber risk will move from complex and undermanaged into the insurance mainstream, where markets can adequately price and transfer risk.

“Risk owners are demanding new solutions for these emerging risks as they work to grow their businesses,” Stephen said in the press release. “This in turn represents opportunities for international insurers to grow through increasing the relevance of their insurance products. By investing in data and analytics, insurers will be able to grasp the potential around growth, geographic expansion and market feasibility.”