Business Leaders Enter 2024 Wary of Climate, Cyber Risks

The impacts of climate change and cyber risks are at the forefront of business leaders' risk concerns as 2024 begins, according to Beazley.

In Beazley's 2024 Risk & Resilience predictions, Richard Montminy, global head of property risks at Beazley, suggested that so-called secondary perils such as hail, tornado, floods, and wildfires are quickly joining hurricanes, named storms, and earthquakes as "primary perils."

"While exposure changes and inflation have played a significant role in driving losses up this year, there is no denying that climate change is also a key driver of this upward loss trend," Mr. Montminy wrote in the Beazley report. He noted that the company's Risk & Resilience research found 28 percent of global business leaders surveyed predicting that climate change will be the biggest environmental risk they face in 2024, up from 18 percent at the start of 2023.

"Looking to 2024 we expect the impact of natural catastrophes to continue to change the property insurance landscape," Mr. Montminy said. "As the property risk shifts from being commoditized to specialized, we anticipate further market consolidation and continued withdrawals from segments of the property market."

Insurers remaining in the market and continuing to underwrite profitably will strengthen their pricing, underwriting tools, and catastrophe modeling, and will focus on improving underwriting experts' skills at anticipating the unforeseen, he said.

On the cyber front, Paul Bantick, global head of cyber risks at Beazley, suggested that the growth of generative artificial intelligence and its use for both good and bad purposes will remain the "unknown known" risk in 2024. He noted that 27 percent of business executives surveyed cited cyber risk as their key risk in 2024.

"Based on the growth we see, we anticipate that the cyber market will triple in size over the next 3 to 4 years,” Mr. Bantick said. "To meet this demand, we need a dynamic cyber market, which includes effective solutions for catastrophe risk to enable the supply of quality capacity to the cyber (re)insurance market to increase, and meet the growing demand for cover."

Cyber-catastrophe bonds will likely play an increasing role in addressing cyber exposures in 2024, Mr. Bantick suggested.