Coronavirus upheavals may have turned the world upside down in the past few months but Swiss Re’s Sonar report finds new technologies and the shift toward lower-carbon solutions remain key drivers of emerging risks.

“At the beginning of the year, the political agenda and discussion in media was dominated by climate change,” Swiss Re CRO Patrick Raaflaub says.

“Attention then shifted to COVID-19. Nevertheless, adaptation to climate risks and the transition to a low-carbon economy with related opportunities and risks for the insurance industry remain crucial.”

Swiss Re says the current crisis shouldn’t overshadow the need for the world to move to a more sustainable economy, and the insurance industry can help with the transition, while keeping an eye on the risks.

The firm’s latest annual Sonar report identifies carbon removal and insurance as the top emerging risk theme for property lines, while for casualty it’s risks from lithium-ion batteries.

Swiss Re says carbon removal is required, as well as emissions reduction, to reach targets for limiting global warming, but the industry is still in its infancy and risks from different approaches still have to be evaluated.

“By 2050 billions of tons of CO2 will need to be stored. The front-runners among insurers will profit from experience gathered over the next decade,” the report says.

Light, high performing, cost-efficient batteries to store electricity are vital for mobile devices and also to transition to a low-carbon economy.

But fire hazards associated with lithium-ion batteries (LIBs) span their value chain, starting at cell production facilities. In January a wrongly declared cargo of LIBs led to a container ship fire.

Swiss Re says unexpected product defects are a particular concern as the batteries become more widely used, increasing the potential for both property and liability claims.

Growth in environmentally friendly buildings, using new production techniques and materials pose challenges, while emerging hydrogen fuel cell technology is developing rapidly.

“The hydrogen fuel sector has the potential to progress the transition to low-carbon economies,” Swiss Re says. “To support this development, insurers will need to fully assess the safety risks when underwriting hydrogen-cell powered vehicles and facilities.”

For life and health, the top emerging risk identified is the rising threat to global pharmaceutical supply chains, with a large percentage of active ingredients manufactured in China and India.

Broadly, other top risks including rising intergenerational imbalances following COVID-19 lockdowns, and such cybersecurity issues as “edge computing” sees more scattered interconnected devices at the end of networks.

From an operational perspective, the top risk is the threat to global standards, such as in technology and regulation, due to frictions and divisions.

The devaluation of truth though “deepfakes” is a new risk theme this year as artificial intelligence is used to fabricate digital content from genuine sources.

A synthetised avatar replicating a real person can be made to say anything, it’s nearly impossible for a lay person to tell the difference, and deepfakes can be used to extort money, damage reputations and manipulate public opinion, according to the report.

Results could trigger insurance claims, increase claims fraud risks and could mean digitalisation of client relationships may need extra security measures.

“The most detrimental impact of all is that in effect deepfake diminishes the value of truth itself,” Swiss Re says.

The risk adds to a cluttered disinformation landscape, with the internet and social media already awash with conspiracy theories, as the world grapples with current and emerging threats.

Other risks flagged include rudimentary bio-technology DIY kits that increase the chance of new biological threats and dangers in the longer-term from minute monitoring technology called “smart dust”.

Emerging infectious diseases were profiled in Swiss Re’s first Sonar publication in 2013, and this year’s outbreak has demonstrated that issues that may seem distant or unlikely can hit with a vengeance.

“The past months have shown the utmost importance of forward-looking risk management,” Mr Raaflaub says.  “Maintaining global dialogue on evolving exposures and trends will help us best prepare for the future risk landscape.”