By Adebisi Ikuomola

The insurance industry is faced with many different kinds of risks, Insurance specific risk and Investment risk. Risk is unavoidable and present in every human situation. It refers to the uncertainty that surrounds future events and outcomes. It is the expression of the likelihood and impact of an event with the potential to influence the achievement of an organization’s objectives.

Risks are generally divided into two (2) classes: Pure risk and Speculative risk.

Pure risks involve only the chance of loss, there is never an opportunity for gain or profit. Examples include injury from an accident, loss of home from earthquake. Only pure risks are insurable.

Speculative risks involve both the chance of gain or loss. Examples are gambling at the race or investing in the real estate market. Speculative risks generally are not insurable.

The main objective of every insurance contract is to give financial security and protection to the insured from any future uncertainties. Insured must never ever try to misuse this safe financial cover.

The insured should not profit from insurance contract by reporting false occurrences as this violates the terms and conditions of an insurance contracts. This breaks trust, results in breaching of a contract and invites legal penalties.

As we all know that every massive structure requires a foundation. Insurance contract devolve on an insurance principle which provides the framework for the applicability and practice over the ages. These principles are insurable interest, subrogation, utmost good faith to mention just but a few.

In the risk spectrum, risk owners fall into various categories; risk preferer, risk averter and risk neutral. Insurance is a subset of the risk management architecture.

Risk management processes are a subset of overall business processes. Processes are used to manage and monitor the ever changing risk environments. There is no doubt that the risk landscape will keep changing.

The following could be identified as possible risk scenarios that organizations may be faced with IT disruption, talent risk, information security risk, Climate Changes, emerging technology just to mention but a few.

Insurance industry therefore needs to brace up in facing new narratives that would be thrown on their plate in order to manage the ever dynamics and changing risk situations and at the same time creating new customer experience.

Globally, insurance companies experienced positive real investment rates of return in most jurisdictions in 2020, whether they engage in life insurance activities, non-life insurance activities or both. Insurers usually managed to achieve positive investment returns despite the initial drop in global equity markets in the first quarter of 2020. (culled from Global Insurance Market trends 2021 OECD).

Emerging risks- new or changing if not mitigated, they can impair lives, cause damage and necessitate unexpected expenditure for households and businesses.

They can be expensive for insurers via claims, financial losses and operational challenges (culled from SWISS re annual Sonar publication). The five main emerging risks come 2025 will likely be the following A1 & robotization, financial instability, natural resources management, cyber risks and climate change (culled from Axa.com 2019 future risk report). The expectations from leaders are multifarious, the players need to build for the consumer, not the industry, deliver services, not products, give them the tools, keep it simple, build partnerships (culled from an article written by Mark Duffey, March 22, 2018).

On a final note, leaders must up their game to continue to remain relevant in the evolving market environment.