According to Jacob Rosengarten, chief enterprise risk officer for XL, greater connectivity and technology are intensifying global risks and contributing to the world’s current state of instability.
This is what Rosengarten told attendees at the European Insurance Forum (EIF), which gathered 200 insurance and business leaders to discuss pressing global risk management issues.
“Many of today’s most pressing global risk management issues are intertwined,” notes Rosengarten. “They are correlated in one way or another, especially in their potential and significant impact on the insurance industry and the businesses we serve.”
Rosengarten identifies five global megatrends that can pose significant future risk to insurers and businesses alike:
The first is persisting economic weakness in the West, notes Rosengarten: “While the US and other Western military powers are cutting military spending, others are building up. Add to these concerns the consequences of significant youth unemployment rates in both developed and emerging economies which contribute to a younger generation that feels alienated from key institutions.”
Growing nationalism and separatist movements: “Whether it’s economic weakness, youth unemployment or other issues, failed global institutions can cause societies to turn inward, and nationalistic, in a ‘romantic’ desire to recapture some notion of historical greatness,” says Rosengarten. “The result is political unrest and instability.”
Urbanization: “More of us are living closer together,” Rosengarten said, noting that half the world’s people live in cities. “Social disparities become very noticeable. Plus, greater numbers of people can find themselves more vulnerable to natural and man-made disasters and greater risk of health issues caused by concentrations of people,” he continues. “This also creates risks associated with weaknesses in governance over delivery of key services, infrastructure degradation, and pollution conditions.”
The rise of developing markets: “Instability in developing markets that once seemed unrelated to developed markets are now becoming more prominent, especially where supply chain risk is concerned,” says Rosengarten. “Developing markets are playing a larger role in producing items (like computer chips) that developed markets need and any disruption has a global ripple effect.”
Technological revolution: “Technology has made this world much, much smaller,” says Rosengarten. “Technology, particularly social media, has played a significant role in the instability of some developing markets. Social media makes it possible for small and oppressed groups to mobilize rapidly and take action in a way that wasn’t possible years ago.”