Climate, technology and geopolitics lead 2025 risks – Beazley CEO

Three major risks dominate Beazley’s thinking about the risks facing insurance buyers in 2025 – climate, technology and geopolitics.

Organisations feel less resilient and more at risk, warned Adrian Cox, CEO of Beazley, speaking at an event to mark the London market insurer and reinsurer’s ‘Risk & Resilience Predictions for 2025’.

Beazley included 3,500 company decision-makers in its poll of the risk environment, informing predictions for 2025.

“Businesses believe these risks are rising and their resilience to them is falling,” warned Cox.

The first of the three threats discussed was extreme weather linked to climate change, as many firms grapple with energy transition challenges and threats to their operational resilience.

The second big source of risk comes from transformative technologies, led by artificial intelligence (AI), with firms concerned about the two-pronged challenges stemming from implementing emerging technologies, as well as incurring the “technical debt” of failing to do so.

Geopolitical volatility is the third threat area of major fear among corporate decision-makers, Cox emphasised, with supply chain risks, trade wars, and firms’ environment, social, governance (ESG) policies all areas of concern.

Climate change

On climate, some 70% of respondents said extreme weather was impacting their business.

The “frequency and severity” of extreme weather events in North America and Europe has increased dramatically in recent years, Cox warned, with the number of “$1bn or more insured loss” natural catastrophe events hitting triple figures.

“It’s interesting because in Europe the traditional ways that countries have tackled nat cats is patently not enough,” Cox said.

“Nat cat pools [in Europe] are not sufficiently well capitalised, insurance is not commonly bought, and governments want to remove this risk from the public purse,” he continued.

“European insurers need to price it in,” he added.

There is a risk that decision-makers are torn between immediate risks and big, long-term threats, he suggested, “dealing with the urgent, rather than the important”.

“However, energy transition has become more of a focus, because previous sources of energy supply have been perceived as unreliable since the Russia-Ukraine conflict,” Cox said.

Energy transition risks will stay elevated, he suggested.

“Our prediction is that while people may become more confident about their resilience, demand for energy will also grow faster than ever before,” he added.

As new risks and technologies emerge, the insurance industry can help transfer new risks and make the technologies scalable and sustainable, he suggested.

Beazley is interested in the underwriting opportunities that are emerging from energy transition in some key areas of innovation, Cox suggested, listing progress on nuclear fusion technology, carbon storage, and carbon credit markets, as potential big opportunities.

Technology risks

Moving onto technological transformation risks, he suggested there were numerous pitfalls.

For instance, Cox noted that 68% of businesses predict job losses as a result of embracing AI.

On the other hand, some 27% ranked the obsolete systems as their top technology risk.

“This is about incurring a growing technical debt due to the obsolescence of technology,” said Cox.

Cyber-attacks remain a major threat, he continued, despite a decline in attacks in the past couple of years. Cox cited progress among many businesses in improving their cyber hygiene and security.

However, he warned about politically motivated cyber-attacks “on the rise”.

Organised criminal groups, particularly within Russia, China and North Korea, are focused on weaknesses in critical national infrastructure within western countries.

The timing of some cyber-attacks highlights their political linkage, he suggested.

Cox used the example of a cyber-attack on a US water plant, timed just after the political approval of a package of US military aid to Ukraine.

Geopolitical risk

Volatile geopolitics are a source of macroeconomic uncertainty, Cox highlighted.

Supply chain risks, concerns about tariffs and trade wars, as well as threats of conventional war and terrorism attacks are all heightened.

Most respondents were concerned that election results in 2024 would damage trade next year.

“We’re relatively certain that trade is going to be less free in 2025,” he warned.

ESG also represents a complicated risk for the future, he suggested, with most firms saying tax and regulations on ESG were growing “too complicated to cope with”.

He also highlighted fears that governments adopting conflicting policies will only make this ESG challenge harder to manage for multinational firms trying to implement consistent policies across borders.

“There’s a risk of being damned if you do, and damned if you don’t,” Cox warned.