In recent weeks, Insurance Business has asked industry stakeholders around the country for their views on the big challenges in 2023. Catherine Carlyon (pictured above) is country manager in Australia for AXA XL, the global insurer and reinsurer.
“A nexus of risk is being formed across climate change, geopolitics and energy,” said Sydney-based Carlyon, referring to the top risks in her firm’s recently released AXA Future Risks report 2022.
The report asked almost 4,500 risk experts from more than 50 countries and a further 20,000 members of the general public from 15 countries, to rank their top five future risks.
“Climate change is still the top risk,” said the report. “The return of war to Europe was not enough to displace climate change from the top of experts’ lists – and, for the first time, experts in every region ranked it as their most pressing risk.”
Carlyon pointed to the “interconnectivity of risk” and how Australia’s exposure to cyber and energy risk in Australia has been amplified.
“The increased urgency to be clear on climate change transition plans, the volatility in energy and other prices and the impact on imports and supplies are being felt here in Australia as much as anywhere else,” she said.
Carlyon said it is “critical” for insurers to adapt and evolve to meet these challenges and to help clients think about how to deal with them.
“In regards to climate change, the impact on natural catastrophe frequency and severity remains an ongoing industry challenge,” she said. “Nobody wants to see another record-breaking flooding event, and that gives an urgency to the industry for supporting the drive for a net zero agenda.
Another challenge for the industry, she said, is the talent shortage.
“With unemployment at an all-time low, a limited talent pool within the insurance market and an inflationary environment, it remains critical that we continue to build flexibility, culture and our reputation as an industry, as well as a company, to attract and retain top talent,” she said.
Carlyon said this will help address future risks and challenges.
During 2023, she said, environmental, social, and governance (ESG) and climate change will remain a focus for AXA XL and their clients.
“We’ve signed up for the ICA [Insurance Council of Australia] climate change roadmap and will be looking to make progress on that this year,” said Carlyon.
Last year, she said, globally, nearly 100% of AXA XL’s staff completed the firm’s online Climate Academy school that educates employees on climate change.
“We’ll also continue to embed our risk framework and culture – something that APRA [Australian Prudential Regulation Authority] have emphasised across the industry,” said Carlyon.
The Australia country manager is also focusing on “smart growth” in their cyber portfolio and Brooklyn Underwriting brand.
The findings of the firm’s Future Risk Report, released in October, show some differences to other risk surveys.
In January this year, the World Economic Forum (WEF), Marsh McLennan and Zurich Insurance Group released their Global Risks Report 2023.
The survey included the results of interviews with thousands of executives across more than 100 countries but, unlike the AXA survey, no members of the general public were interviewed. The interviews with executives globally showed that they regard rapid inflation, debt and the cost-of-living crisis as the biggest threats to doing business over the next two years.
“This year’s global findings are in sharp contrast to the 2021 data [for the 2022 report] which saw ‘failure of cybersecurity measures’ identified as the top perceived risk, followed by ‘extreme weather events’,” it was outlined in a Zurich Insurance Group media release.
The release noted that this changed view about the current top business risks is “despite evidence of those activities [cyberattacks and nat cats like floods] playing out this year across the region and globally.”
“Seeing inflation rise to the top reflects the sharp and sudden nature of inflationary pressures, and the impact those pressures have on business and the economy,” said Alex Morgan, chief risk officer (CRO) for Zurich Asia-Pacific.
In the same survey one year ago, Zurich Asia-Pacific said the cost-of-living and rapid inflation didn’t feature as a Top 10 global risk.
Morgan said that while natural disasters did not make the top 5 in the survey released this month, they are on executives’ radar.
“While not in the ‘top 5’ of this report, weather and climate change risks were highly placed on executives’ risk radars and continue to be a focus for discussion between Zurich and its customers,” said Morgan. “Climate change risks also featured at the top of the list for long-term risks.”
