Noel Richardson, AXA XL’s chief risk officer, has told Emerging Risks the results of AXA’s latest Future Risks Report while not surprising highlight the growing concerns of threats posed by ongoing climate change.
Richardson was speaking as AXA published the latest edition of its Future Risks Report which found the world is in the midst of polycrisis. It warned geopolitical tensions, the exponential emergence of new technologies (such as generative AI), and the acceleration of global warming, no longer follow one another but are happening at the same time.
While the risks associated with artificial intelligence and big data show the greatest increase in the experts’ rankings, rising from 14th place in 2022 to 4th place in 2023. However, as was the case last year, global warming is in first place among both experts and the public. But, for the first time, this risk is ranked first in every region of the world, including by the public, without exception.
When asked if the report contained any surprises, Richardson said: “Broadly speaking, the answer is no! It’s likely no surprise that climate, cyber and geopolitical risks are the top three highlighted in this year’s Future Risks Report. Those key areas are now perennial risks facing businesses of all types, societies and individuals – worldwide.”
He added: “It is however interesting to note that climate is for the first time, the top-ranked risk by both risk experts and the general public. This is a risk that affects all clients, to a greater or lesser extent, and is clearly a top priority for individuals and communities too.”
“It’s also notable that Artificial Intelligence (AI) has risen up the list of priorities for the experts who took part in the Future Risks Report. This isn’t necessarily unexpected, given the recent focus on AI developments in everyday life. This is clearly an area that we, our clients and risk colleagues are keeping a keen eye on.”
“A clear theme emerges from the report; that risks are interconnected and that we exist in an era of ‘polycrisis’.”
He added that the finding that the world was facing multiple but interconnected risks highlighted the need for the response from insurers to evolve to meet the changing needs of its clients.
“The risks associated with climate change affect all businesses, of course. We are working with our clients to assess, manage, mitigate and transfer those risks – as well as looking closely at our own Environmental, Social and Governance (ESG) and climate-related policies and targets,” Richardson continued. “But cyber too is a pressing risk that affects all our clients, regardless of their size or industry type.
“Given its evolving nature, cyber risk brings the added challenge that there are things that might happen tomorrow that didn’t exist yesterday. And the insurance industry’s response and expertise is also evolving.”
“We recognise that it’s vital that we increase our understanding of what drives these risks, so we work with experts in security, for example, to help our clients to appreciate the ways in which they can better protect themselves. This is especially pertinent for clients in the SME sector.”
He added: “As the technology and people’s ability to subvert it develop, new risks will continue to emerge. AI, for example, could potentially change the equation again here, altering the nature and ease with which cyber-attacks could be perpetrated.
“These are just some of the reasons why we recently created the Cyber Center of Expertise (CoE) across the AXA group. Led by AXA XL, the Center will serve as a platform to develop cyber risk services and risk transfer while sharing knowledge and lessons we’ve learned across all AXA entities.”
In terms of the response required from the insurance industry Richardson said there was a need for a broader response than simply a policy to mitigate losses.
“We recognise that our clients know their industry best,” he explained. “What we bring to the table is expertise, knowledge, research and the insights we derive from leveraging data, as well as our scale and global reach.
“The insurance industry aims to be open to helping its clients to deal with some of these emerging risks not just with risk transfer and traditional insurance, but the services that complement that. With risks like cyber and those associated with the energy transition, for example, we recognise that insurance needs to be innovative and provide risk mitigation expertise to enable our clients to bolster their resilience.”
Now is the time for the industry and the wider business community to have discussions around the risks they face.
“We recognise the need for dialogue across the industry – and indeed across sectors – to help our clients to understand the risks and opportunities they face in this changing environment,” he said.
“We’re keen to engage in collaborative, industry-wide dialogue on the challenges that businesses face. We take part in market-wide forums and working groups that seek to engage on some of these topics to boost understanding, share knowledge and improve risk resilience across the board.
“We are also keen to continue to develop cross-AXA, global collaborations, as we have done with cyber, which is one of the most dynamic and important risks today and in the future. And indeed, the Future Risks Report is a good example of a multi-stakeholder communication and knowledge-gathering exercise. This is the tenth year that AXA has produced this report, which means we have a depth of data and insights from which to draw lessons about the risks our clients face. The report draws together views from stakeholders from right across the spectrum. This kind of effort is, we believe, valuable in helping insurers, brokers, clients and the general public to better understand future risks. It’s great that we are talking about it here, and I hope it provokes further discussion!”