A View From Me on ’23: Noel Richardson, Chief Risk Officer, AXA XL

As we head into 2023, economic, geopolitical and social unrest concerns are rapidly rising up the agenda of risk experts, corporate boards and the general public – across the world.

Uncertainty around cost-of-living pressures on people’s wallets, the looming threat of power blackouts and the escalating cost of fuel, are adding to concerns that we’ll see an uptick in civil strife and unrest in 2023 – and beyond.

Against that backdrop, the ongoing conflict in Ukraine highlights that the gamut of social and geopolitical risks runs from civil unrest to all-out war.

In AXA’s recent Future Risks Report 2022, geopolitical risks ranked as the second biggest concern of risk experts and the general public, in all regions of the world, overtaking cyber and pandemic risks.

Energy risks, which are linked to social and political risks both as a cause and by-product, also rose rapidly up the list of risk experts’ concerns – ranking fourth compared with 17th a year previously.

While these are risks that have been on our radar for some time, it is clear that they are increasing in importance for clients and insurers alike.

For the first time, the risk experts surveyed for the Future Risks Report cited three economic risks in their top 10; financial instability, macroeconomic deterioration and monetary and fiscal stress.

These economic concerns, and their links to potential civil strife and unrest both at home and around the globe, are set to be uppermost in the minds of risk professionals and corporates for the months and years to come.

Economic recession will also affect lines of insurance including trade credit and political risk. As worsening economic conditions bite, we expect to see these risks emerge on the horizon. While some economic risks will be immediate others, will emerge over the longer term. Another evolving risk area for 2023 will be cyber. Insurers are examining how we respond to an increasing customer demand for cyber insurance products and the potential systemic risks surrounding this area of coverage. There is opportunity for public-private partnerships to address this changing and important risk area; innovation is needed and will be at the heart of the insurance industry’s response.

Energy supply is another area of risk that will continue to rise in importance next year and into the future. In the next 10 years or so there will very likely be major changes to the way energy is supplied and consumed. With this change will come risk – and opportunity. We are working with our energy clients to support their transition to new sources of power and the changing ways in which energy will be supplied, stored and used.

Supply-chain risk, so starkly highlighted by the COVID-19 pandemic and the war in Ukraine, is another area that we are monitoring closely. The pandemic and the war shone a spotlight on how production of certain goods is heavily concentrated in the same areas. Many clients are now seeking to diversify sources of supply and near-shore production, or elements of their production, in response.
This is an emerging, changing area of risk that we’ll be watching closely in the months to come.

As society seeks to adjust and evolve to new realties, I believe that our industry needs to focus on understanding and anticipating the future risk environment in which our clients will be operating. What will our clients’ shareholders, customers and employees expect from them?  Our role is to work with our clients to find answers to those questions and provide insurance products and risk management services that support our clients transition through this challenging and fast-moving environment.