Digital Insurance reached out to insurance professionals for comments related to new and emerging insurance risks to watch in 2025.
Technology and climate change are highlighted by the respondents as being key areas for risk management.
Responses have been lightly edited for clarity.
Paul Kottler, U.S. president at Crawford Global Technical Service
The insurance industry faces mounting technology risks as it navigates the growing exposure to multiple platforms and aging legacy systems, and addressing these risks will take greater priority in the coming year. Each additional system and integration point introduces potential vulnerabilities, creating a complex web that can challenge data security, operational efficiency, and scalability – and this is the year that this web must be unraveled. To remain resilient, insurers must not only modernize but also adopt a long-term view and a proactive approach to managing the risks inherent in their technology infrastructure.
Garret Gray, president of global insurance solutions at CoreLogic
In 2023, severe convective storms collectively caused more damage than hurricanes—even though these storms have traditionally been considered secondary perils. While that likely won't be the case for 2024, secondary perils are an increasing risk for the insurance industry because climate change is leading to increased frequency and severity of these storms. Cumulatively, they have the power to impact the insurance industry as much as a large hurricane loss. Leveraging data solutions that take a holistic approach to risk that includes all perils will help insurers stay profitable, despite changing weather patterns.
Nakita Devlin, CEO and founder of Ric
As climate risks escalate, the insurance industry needs flexible, rapid-response solutions to cover new and emerging threats. Parametric insurance for extreme weather events will likely become mainstream—not just for corporations but also for households and communities. Start-ups and insurtechs are paving the way, using technology to reach the consumer market at scale. For capacity providers, this means access to a larger, more diverse pool of policyholders, reducing concentration risk and offering greater portfolio stability.
Brian Carey, senior director of insurance solutions at Equisoft
While AI regulation appears less likely under the incoming U.S. presidential administration, carriers shouldn't write it off completely. AI regulations could still be enforced in some capacity at the state-level — especially since there's already some regulatory activity in the EU — which could impact underwriting decisions and bias. Insurance commissioners don't want to prevent innovation or regulate in a vacuum, but if life insurance technology reaches a point where it's unable to fulfill the role that regulators and consumers envision, that's when guidance could be introduced.
Bethany Greenwood, group head of speciality risks at Beazley
As the global market
Newly elected governments are likely to bring starkly different approaches to regulation and our risk and resilience research has already shown an increase in business leaders' concern over regulation risk, with stated concern rising from 18% to 24% in the past three years. This is only likely to rise as regulation stances diverge, creating directors' and officers' (D&O) liability risk.
While balancing differences by market has always required careful attention, this challenge will now be more complex than ever. Businesses may need specific policies in some markets that in others could see them in court, creating a "damned if you do, damned if you don't" compliance environment which companies will need to carefully manage.
Mike Allee, president at UCT
As embedded AI gains more traction, 'new' data readiness risks will continue to expand. Many life insurers are exploring AI uses in 'cost-intensive' fully or partially digitized service operation areas and siloed IT sources, such as PAS, underwriting, new business admin, and claims. Organizations will continue to invest in and prioritize proof of concept use cases for AI and associated data projects, but data readiness, sourcing and context will largely determine the success of these initiatives.
Katie McGrath, CEO of North America at Swiss Re Corporate Solutions
With climate change-induced hazard intensification likely to increase losses in the future, mitigation and adaptation measures are key to reduce loss potential. To prioritize actions however, risk managers must first understand their risk and decide what risk to retain and what to transfer. To get this balance right is especially important in the current environment. A multinational utility company, for example, might need to identify which power generation assets are most exposed to natural hazards such as floods or storms to inform where they should focus efforts on mitigating risk and preventing losses. Here, advances in technology are key.
We expect Gen AI to have both an immediate and lasting impact on the insurance and reinsurance sector as the technology can help to address some key industry specific challenges such as consumer engagement, high operational cost, and comparatively slow pace of digital disruption. Commercial UW in particular, has a high prevalence of unstructured data and manual workflow, making it a fit for the efficiency benefits that Gen AI might deliver.
At the same time, internal, broker supplied, and external data sources are abundant and growing – yet the industry's processes have been slower to be able to leverage and incorporate these into the underwriting processes. Costing tools and workbenches still take time to update and change and we are excited about the potential of AI to help speed up the pace of change and reduce transaction times across the UW value chain."
"Ultimately, AI will only be as good as those people who develop and utilize it, and the quality of the underlying training data. The added value of AI therefore comes from the smart combination of both AI models and human processes.
(These responses were shared with other publications)
Jason Kaminsky, CEO of kWh Analytics
Economic growth, crypto, and AI will be accelerated under a new administration and contribute to significant load growth.
Despite an expected increase in natural gas, solar and storage will continue to be the primary source of long-term growth to meet increasing energy demand.
Coleman Johnson, SVP, chief underwriting officer at The Mutual Group
There are several emerging risks that will continue to dominate the headlines in 2025, including PFAS, human trafficking, phthalates, cyber security, and biometric data. There are a few that have already emerged but remain problematic, like active shooter incidents and traumatic brain injuries.
I think the two biggest challenges that face P&C companies in 2025 remain climate change and the impact it's having on weather patterns and property insurance and continued social inflation and the impact its having on casualty insurance.
These trends are here to stay and challenge the entire insurance ecosystem to be more innovative in designing solutions that make protection both affordable for our customers and profitable for carriers.
Jeff Gill, EY Americas insurance sector leader
As we approach 2025, the insurance industry must prioritize resiliency to effectively navigate evolving risks. Putting resiliency at the forefront will be key to managing these risks and ensuring long-term stability in a rapidly changing environment.
Evolving regulations and compliance requirements will impact insurers' operations, product offerings and profitability. For instance, the NYDFS Cybersecurity Regulation, will require insurers to adopt enhanced security protocols to mitigate data breaches and cyberattacks. These regulations emphasize the need for greater resiliency, as insurers must demonstrate robust cybersecurity practices to protect client data and ensure compliance.
Advances in technology, such as artificial intelligence (AI) are transforming the industry but continue to introduce new risks. Data and AI risks require insurers to address challenges like algorithmic bias, data privacy, and regulatory scrutiny, while implementing strong governance to ensure ethical use and compliance.
The increasing frequency of severe weather events will challenge insurers to enhance risk prediction and adjust underwriting models. Insurers must adapt pricing strategies, leverage innovative technologies, and collaborate with industry stakeholders to build resilience and better respond to unforeseen climate events.
These risks highlight the need for insurers to adopt proactive risk management strategies, invest in technology and innovation, and engage with regulators and stakeholders to effectively navigate the evolving risk landscape in 2025. Balancing the pursuit of growth with effective risk management will be crucial, as the industry looks to innovate and expand while maintaining resilience against these risks.
Ken Hugendubler, principal at Baker Tilly
AI governance will be a top issue for insurance organizations across the market as the technology progresses and more use-cases are explored. Every carrier is in a different spot when it comes to AI and ruling insurance bodies recognize that, which is why the NAIC issued a nonprescriptive Model Bulletin last year around the use of AI systems.
Several states have adopted the bulletin and AI governance currently rests in the hands of an organization's Board of Directors', but that will likely change over the next few years as a handful of other states have issued insurance-specific regulations around AI and want to ensure AI models are accurate and secure and aren't discriminatory.
Rachel Bush, VP, information risk governance at Nationwide
In today's interconnected world, every corporation relies on third parties, creating multiple perspectives of risk, including business resiliency, privacy and cyber risks like identity compromise.
Threat actors understand that by targeting a single third-party solution, they can potentially access data from multiple companies, amplifying the impact of their attacks.
Andy Logani, chief digital officer at EXL
Emerging risks—those that evolve unpredictably and are not fully understood—will continue to challenge the insurance industry in 2025. These risks arise from advancements in technology, environmental shifts and changes in societal dynamics and includes financial risks like fluctuating interest rates, capital costs, and inflation-driven claims, and non-financial risks such as climate change, regulatory complexities.
From an insurer's standpoint here are the key focus areas for the future:
1. Increasingly insurers are moving beyond short-term solutions and focusing on managing significant long-term risks. They are building capabilities to identify emerging threats while fostering innovation, strategic agility, and resilience. The primary goal is to safeguard the organization, its stakeholders, and its shareholders. As the economic downturn situation continues into 2025, CROs will place greater emphasis on capital management strategies, such as sourcing alternative capital and leveraging catastrophe bonds, to ensure long-term resilience. Life insurers are likely to adopt capital-light models to optimize returns, especially under pressure from investors.
2. Climate risk is becoming more acute, especially for property and casualty (P&C) insurers. Catastrophic events such as wildfires and hurricanes are growing in frequency, driving insurers to invest in climate analytics and update their underwriting models. Life insurers are also integrating climate risks into their actuarial models, while corporate boards increasingly embed climate considerations into their overall strategies. However, there is still considerable room for improvement in climate risk modeling. CAT (catastrophe) modeling, often seen as imprecise, is a particular area of concern, and one of the focus areas for insurers is to refine their approach to utilizing climate data for more accurate predictions, such as estimating the probability of ice-related damages in regions like New Jersey.
3. Supply chain disruptions, caused by weather events, political instability, strikes, or health crises like COVID-19, are also key risk factors. Strikes at major ports, for example, can lead to significant business disruptions, particularly for the property and casualty market. These events, whether related to war, extreme weather, or health emergencies, result in multi-million-dollar losses. Modeling business interruptions will become increasingly important, enabling insurers to better predict and invest in mitigation strategies.
4. Reputational risk, driven by public sentiment and social media, is another growing concern for insurers. The rise of social media has amplified the potential for reputational damage, making it essential for insurers to employ sentiment analysis tools to monitor public perception and address these risks proactively.
5. The use of Gen AI to model emerging risks, where historical data is limited. By generating synthetic data, AI-powered tools will enable insurers to forecast high-impact events with greater accuracy. However, the widespread adoption of AI also introduces challenges related to privacy, fairness, and cybersecurity. As a result, insurers will need to seek specialized talent with expertise in data and technology risk management.
Todd Greenbaum, CEO of Input 1
Traditional insurance models are at a crossroads, challenged by rapidly evolving customer expectations. Yet in this pressure cooker of change, we're seeing something remarkable: the emergence of an insurance ecosystem that's faster, smarter and fundamentally more human. As AI adoption accelerates across the insurance value chain, from streamlining claims to enhancing underwriting precision, 2025 will mark a pivotal shift – an industry-wide digital inflection point. The question isn't whether to transform but how fast you can pivot.
Let's confront the elephant in the room:
Stop thinking about insurance as a product. Start thinking about it as a risk management tool delivered through an experiential platform. Leading carriers are moving beyond the traditional "quote-and-hope" model to create what we call "living policies" – coverage that breathes with the customer's changing needs. Imagine policies that adjust coverage dynamically based on real-time data, such as driving behavior or home IoT device alerts. AI isn't just handling claims anymore; it's preventing them. Data isn't just informing decisions; it's anticipating needs. The result? Insurance transforms from a transactional product to an essential partner in life's most critical moments.
The insurance market is entering a decisive era where innovation will separate leaders from laggards. While digital-native carriers are well-positioned to capitalize on technology as a core business-model, traditional players are not without hope. Legacy carriers that adopt hybrid strategies—combining advanced digital capabilities with the empathy and personal touch that customers value—can find their footing in the rapidly evolving landscape.
The winners in 2025 won't be defined by the biggest AI budgets but by those who use technology to anticipate customer needs, deliver personalized solutions, and build trust at every touchpoint. The future belongs to carriers who innovate with empathy, ensuring every decision, interaction, and investment strengthens their relationships with customers and sets them apart in the new insurance economy.
Tomorrow's insurance leaders aren't adapting to change; they're shaping it. If you're leading an insurance organization in 2025, ask yourself: Are you adapting quickly enough to meet the evolving needs of your customers?
