Insurance Futures

We recently published Insurance Futures, a series of essays exploring the possible futures of the insurance landscape to 2035, commissioned by Milliman.

On our risk horizon was the near certainty that a pandemic would emerge. The uncertainty was timing.

The original essays shared a common narrative about a world of fragile, tightly coupled systems and growing risks of extreme events. The pandemic has created a ‘hyper-turbulent’ environment characterised by both runaway change and the inability of many global, national and corporate leaders to adapt. Put simply, it has accelerated many of the developments we explored. It has given new urgency to action on climate change. Cultural transformations that might have taken decades are happening in weeks. We are seeing radical economic development and exponential rates of invention.

Cities concentrate creativity, jobs and economic power. They also concentrate risk. At the same time, they are playing a leading role in driving the sustainability agenda, often in the face of weak national political commitments to large-scale, urgent change.

Peter Kingsley, in the final essay in the current Insurance Futures series, commissioned by Milliman, explores how cities are on the front line in the race to reduce climate change and biosphere risks, and avoid the ‘too little, too late’ scenario. The decisions city leaders take over the next decade will shape the future of the planet.

The insurance industry has a vital role to play in underwriting and financing responses to both the physical and systemic transition risks, working in partnership with city leaders. It also has an opportunity to drive systemic innovation, in the public interest.

Innovation to address climate and biosphere sustainability is both a source of solutions to urgent problems and a source of systemic technological, socio-political and financial risk.

In the eighth essay in the Insurance Futures series, commissioned by Milliman, Peter Kingsley explores how novel forms of complex risk will emerge as industries, trade, financial markets and political systems—each fragile—adapt. We can expect shockwaves where global systems are not risk-adjusted for possible downsides, or for sudden changes in government policies and unintended consequences.
Less well recognised, shocks will emerge as far-reaching innovation transform entire sectors.
The insurance industry has a vital role to play, supporting vulnerable communities and working with everyone from city and corporate leaders to inventors of high risk technologies. The challenge: cut carbon emissions, reduce pollution and create an orderly transition to a sustainable world.

The deployment of an estimated trillion connected devices by 2035 and the roll-out of both Augmented and Virtual Reality technologies will create a new hybrid reality. The physical world and digital representations of it—together with entirely new virtual worlds—will co-exist. People will move from one environment to another in daily life.

In the seventh essay in the Insurance Futures series, commissioned by Milliman, we explain why the hybrid reality environment will create new approaches to risk management and why it will bring major new risks to systems, people and places along with it. The implications for the insurance industry will be profound.

The jury is out on whether it will be the police or the criminals who will benefit most from an increasingly networked world.

In the sixth essay in the Insurance Futures series, commissioned by Milliman, we explore alternative scenarios for the future of policing and crime.

In one scenario, over-stretched law enforcement organisations are overwhelmed as criminals use everything from automated cyber-crime and quantum computing to the Internet of Things (IoT) to engineer a digital ‘crime harvest’.

In the other, predictive policing technologies, skilful exploitation of the IoT as digital crime scene and widespread use of blockchain technologies combine to make crime prevention and detection so effective that crime rates drop dramatically.

Unprecedented uncertainty hangs over international trade. This extends well beyond the short-term prospects for US-China trade relations and the simplistic narratives about post-globalisation.

In the fifth essay in the Insurance Futures series, commissioned by Milliman, Philippe Legrain explores how climate crises, digital technology, virtualisation and other policy drivers may both localise and globalise.

Political rivalries and the decline in the US-led liberal international order amplify trade and climate risk. Future scenarios range from the collapse of globalisation at one extreme to cooperation restored at the other, with strategic competition or conflict as intermediate possibilities.

Geopolitical competition, migration, national populism, accelerating technological change, media manipulation and climate change are transforming the political risk landscape. The challenges to leadership teams are complex, interdependent and characterised by radical uncertainty.
In the fourth of a series of essays on Insurance Futures, commissioned by Milliman, Mat Burrows explores two possible extreme scenarios that may emerge to 2035.
In one, he outlines ‘the possible pathway to war’. In the other, a ‘resurgence of cooperation’.
He also considers some of the implications for the insurance industry and the vital importance of political risk. Our experience is that by exploring extreme possible futures, scenarios can create a framework within which policy options, hedging and business strategies can be developed. Too often, decision-makers wait until crises are upon them, by which time it is too late. It takes judgment and courage to make decisions in conditions of uncertainty.

Regulators, banks, insurers, corporations and institutional asset managers share a problem: how to ‘transition’ to a sustainable world, whilst maintaining financial stability.

The two are in conflict. Timing is central. Climate, in many parts of the world, is changing fast. Culture, contrary to conventional wisdom, can change in weeks and months, as futures are re-imagined and new narratives emerge. Politics, even faced with long-term strategic and possibly existential risk, is characterised by prevarication and delay.

In the third of a series of essays on Insurance Futures commissioned by Milliman, Peter Kingsley argues that shocks to the financial system will emerge long before the full impacts of climate change are felt and sea levels rise, as investors make large-scale changes to their asset portfolios. The fundamental structures of asset management and insurance will be transformed. Some regions will be uninsurable. Radical transparency will force sectors, individual corporations and financial institutions to re-invent themselves, or face failure.

There are three broad long-term financial scenarios: ‘Too Little, Too Late’, ‘Stable Transition’ and ‘Crisis Now’.

“Politics is how we choose who wins and loses” and “prevarication is a typical response of governments faced with hard choices”. This will not work for a time-bound problem like climate change, as Tom Burke, a member of our editorial board, puts it in the second of the series of Insurance Futures essays commissioned by Milliman . Understanding complex risk and modelling the potential for long-term systemic crises will create multiple opportunities for the insurance industry and risk specialists, as they evolve from providers of transactional services to advisors and primary actors.

Contrary to conventional wisdom, in chaotic social and political environments, culture can change rapidly. In the first of a series of essays on Insurance Futures commissioned by Milliman, we explore how climate-related ‘pre-shocks’, in the form of sudden changes in public and market sentiment, will emerge long before physical events, such as irreversible damage to low-lying cities. In extreme scenarios, over the next decade we may face a perfect storm of runaway climate change; political panic measures; radical innovation; culture shocks; and environmental activism. Cultural values will be decisive in the transition to a sustainable world. The insurance industry has a vital role to play.