The insurance industry has always been a bellwether for understanding global risks. As challenges grow more complex, the industry finds itself at the intersection of environmental crises, technological disruptions, and evolving societal expectations.
According to one expert, the interconnected nature of modern risks and how the insurance sector is adapting to meet these challenges.
“We’re seeing risks that don’t stay confined within borders,” said Robert Paxton (pictured), managing director of Charles Taylor’s Canadian operations and global head of strategy and business development. “Whether it’s environmental events, cybersecurity threats, or supply chain disruptions, these issues are global in scope and impact.”
The interconnectedness of these challenges means insurers can no longer afford to operate alone. Instead, there’s a growing recognition that expertise must be pooled across specialties to effectively address risks that cascade across industries and geographies.
“Historically, risks were examined in silos, but this approach needs to change,” said Paxton. Lithium-ion batteries are a clear example of this.
The exposures associated with these batteries span their entire lifecycle – from manufacturing to product liability, marine transportation, and air travel. “These risks cut across multiple insurance lines,” Paxton said.
Addressing such multifaceted challenges demands a collaborative approach, where experts from different fields work together to assess and mitigate risks comprehensively.
Catastrophe and environmental risks are a major focus globally. In Canada alone, natural catastrophe losses have hit record levels in recent years, reflecting a global trend of increasingly severe weather events.
The disasters come at a time when the industry is also grappling with the shift toward renewable energy. While necessary for combating climate change, this transition introduces a new array of risks.
“Renewable energy projects come with a learning curve,” Paxton said. “We don’t have the same historical data for wind and solar farms as we do for oil rigs or coal plants. That’s a challenge for underwriters.”
This gap in understanding is compounded by the urgency of the green transition. As companies and governments push for rapid adoption of sustainable practices, insurers must adapt their models to reflect new realities.
“The push toward renewables is critical, but it’s a double-edged sword. We need to be proactive in identifying and managing these emerging risks,” Paxton said.
At the same time, cyber risks present a mounting and interconnected challenge. As cyber threats evolve, they pose risks that transcend borders and industries. Paxton highlighted the growing intersection of cybersecurity with emerging technologies like artificial intelligence (AI).
“AI is a double-edged sword,” he said. “On one hand, companies – including insurers – are using AI to improve productivity, reduce costs, and streamline processes. On the other, bad actors exploit AI for cyberattacks, misinformation, and disinformation.”
While AI and other technologies promise significant efficiency gains, they also require careful management. Paxton stressed that AI can never replace human expertise. “We need to strike a balance where technology handles repetitive tasks, freeing up experts to focus on complex problems,” he said.
What is the way to address the interconnectivity of risks like cyber attacks, AI, and intensifying climate change impacts? For Paxton, the solution lies in collaboration.
“By sharing knowledge across teams and regions, insurers can gain better insights and mitigate risks more effectively. This collaborative approach is under-discussed but critical for addressing the industry's challenges,” Paxton said.
One of the industry’s strengths, he said, lies in its ability to draw on global expertise to address local challenges. This interconnectedness allows Canadian insurers to learn from experiences in other markets and apply those lessons at home.
“We’re part of a global network,” Paxton said. “That gives us access to insights and data that can help us tackle issues more effectively.”
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