According to one survey, respondents concurred that the unpredictable impact of AI on multivariate global risks is a big question mark

Based on a Nov–Dec 2024 survey of around 170 worldwide partners* of a global insurance law firm about the most impactful issues and risks expected in 2025, the latter firm has announced several trends in a global risk forecast.

First, AI emerged as the top-ranked predicted risk for 2025, displacing all other major concerns. Sustainability issues, once a significant focus, have dropped to the bottom of the risks in respondents’ list of concerns.

Second, the level of predicted perceived risks varied across regions. In the US, economic volatility was at a lower priority, with greater attention placed on the growing challenge of social inflation, encompassing increasing litigation, expanded liability definitions, plaintiff-friendly court decisions, and higher compensatory jury awards. In contrast, geopolitical instability had emerged as a significant concern in respondents from the Asia Pacific region and Latin America, with political uncertainties and conflicts coming into sharper focus across these markets.

Other findings

Third, sustainability issues, which previously carried greater weight in the insurance industry, saw a marked decline in potential impact in the latest survey. Areas such as net-zero targets, greenwashing claims, and consumer protections had appeared less urgent among respondents, potentially influenced by the prospect of a new US administration and shifting political priorities, as well as a more established regulatory framework. Also:

• Although AI was overall the biggest risk, respondents felt the true impact of this would not be felt for three to five years, while risks such as social inflation and cyberattacks were deemed more immediate.
• Over a five year horizon, more than 85% of respondents cited adoption of AI as the event that will have the highest risk impact
• Respondents’ perceptions of extreme weather risks diverged significantly by region. In continental Europe and Latin America, their insurance clients were already experiencing the effects of extreme weather. Meanwhile, in the UK, these impacts were projected to manifest more substantially in five or more years. Much more urgent in the UK respondents were cyber issues, and the impact of economic instability.
• About 80% of respondents across Singapore, Hong Kong, Australia and New Zealand had rated cyberattacks or outages as a moderate, large or severe risk to the insurance sector, reflecting high concern over the increased adoption of AI and next-gen IT systems. More than two-thirds of APAC respondents had indicated increased concern over geopolitical instability, with 44% believing this geopolitical tension will have the greatest impact on the insurance industry in the next one to two years, highlighting expectations of intensifying trade disputes. There was also concern around the intersectionality of risk, including AI accelerating geopolitical instability and cyberattacks.
• Data suggests that, at the global level, the cost to the insurance sector of widespread AI adoption remains a huge unknown. And if a traditional policy does not consider AI related risks, it could lead to unintentional cover in the event of an AI-related loss — even though such loss had not been priced into the policy.
• At the insurance industry level, respondents had learned lessons from “silent cyber”: To prevent AI related coverage disputes, they indicated that the industry must understand AI risk use-cases now, and assess which risks traditional policies already (silently) cover.  

The authors assert that technology will be used both positively and maliciously across all elements of risk. Corporate awareness and adequate internal procedures will enable preparedness and allow for opportunities to be harnessed and maximized, according to their survey report.

According to Meg Catalano, Global Managing Partner, Kennedys, the firm releasing its survey report: “The universal challenges created by the use of AI, the threat of cyberattacks, and geopolitical instability, need to be considered in tandem with regional concerns such as extreme weather events, economic volatility and social inflation.”

*from 17 countries across North America, LATAM, UK, EMEA and APAC regions, including “detailed qualitative assessment of a wide range of client interactions, instructions and industry trends in Asia and globally”.