Robert Paxton, global head of strategy and business, Charles Taylor, on why the boundaries which have traditionally defined the industry will become increasingly blurred in the coming year.

The insurance industry stands at crossroads. For generations, our competitive advantage was simple – we could compartmentalise, analyse and price distinct risk categories. Property here, liability there and cyber in its own box. That world is now changing.

Recent research from Charles Taylor has demonstrated how traditional risk boundaries have fragmented to the point where very few stand in isolation. The container ship Ever Given that blocked the Suez Canal in 2021 demonstrated this perfectly. Within hours we saw marine hull claims. By day two, supply chain disruptions rippled across continents. Day three brought pharmaceutical liability when medications couldn’t reach patients, and day four revealed aviation contingency exposures when fuel logistics collapsed. One incident triggered six coverage lines across four continents simultaneously.

That wasn’t an anomaly, but rather a preview of our operating environment for 2026. For commercial companies, the idea of their risk sitting in siloed boxes is no longer representative or realistic.

Three forces are driving this shift. Climate acceleration is creating unprecedented patterns of interconnecting risk – both geographically and across lines of coverage. For example, the 2023 Canadian wildfires shut down outdoor events in New York, thousands of miles from the burn zone. Businesses discovered their policies covered physical property damage – not atmospheric disruption – leaving losses uncovered.

Geopolitical fragmentation is also making risk harder to predict. The Ukraine conflict demonstrated how regional events create global stress tests; European energy companies seeking alternative natural gas supplies drove up North American prices, generating unexpected business interruption claims for energy-intensive manufacturers, while Ukrainian grain disruptions triggered agricultural insurance claims in Africa. Stable risk assessments previously relied upon can now become obsolete within days.

We’re also seeing the line between digital and physical risk being erased by technological convergence.  A good example is the Colonial Pipeline ransomware attack which extended beyond cyber losses, shutting down fuel distribution across southeastern USA, triggering business interruption, aviation disruption and commercial auto exposures across three industries.

From a risk perspective, the danger is that we’re insuring interconnected systems with unprecedented complexity using policy language designed for isolated risks. While the industry is innovating with parametric insurance, systemic risk coverage and contingent time element policies, these products are only the beginning. So, what’s next?

Instead of abandoning specialisation, we need to build integration capabilities. We need cross-functional underwriting teams that bring expertise from multiple disciplines to assess complex exposures. Aviation specialists need to collaborate with cyber experts when assessing drone operations. Marine underwriters must work alongside climate scientists when pricing renewable energy infrastructure.

To be effective, we need this to extend beyond internal teams and spread industry wide. Ideally, we need collaborative data ecosystems that enable real-time risk intelligence. While difficult to implement, industry-wide early warning systems can help all participants anticipate emerging risk patterns while maintaining competitive advantages. By pooling anonymised claims data and loss patterns across sectors, we can identify interconnection signals before they become cascading failures.

We also need comprehensive policy architecture that addresses cascade scenarios. This means rewriting coverage to explicitly account for how risks trigger across traditional boundaries. We need policy language that recognises a cyber event can become a supply chain disruption, which becomes a business interruption claim, which triggers liability exposures – all within the same incident.

This new risk environment isn’t a threat to our industry. In fact, it builds on our fundamental strength to see risks others cannot and price uncertainties others avoid. We must move away from just paying losses and double-down on trying to prevent them. Let’s not be satisfied with restoring the status quo and build robust systems that emerge stronger from disruption.