Insurers and government form WEF coalition to tackle tech risks

A coalition of the insurance industry, government and technology companies has been formed, led by the World Economic Forum (WEF), to “take charge” of new risks posed by technology. Insurers have warned that large levels of uninsured risk from new innovations, including drones and driverless cars, will impose a heavy cost on society and the global economy. Victoria Shirazi, who will lead the Mitigating Risks In The Innovation Economy project at the WEF, said: “No one currently knows the magnitude of the risk exposure of society to new, uninsured technologies. A technology failure that was once both small and contained can cascade into potentially catastrophic losses. This initiative will help societies prevent, respond to and recover from these new risks.” Analysis of risk scenarios from insurers estimate that a cyberattack on the US northeast electrical grid could cause economic losses of up to $22bn, while cyber-driven disruption to a cloud service could cost anywhere between $15.6bn and $121.4bn. The costs rocket for a compromised software upgrade on globally interconnected systems, which could put between $4.5trn and $15trn of global GDP at risk, said the WEF. Such risks are currently largely uninsured, with the insurance gap estimated at 83% for a cloud service disruption. The working group’s goals include closing the gap in governance frameworks to manage innovation risks and setting up a data-sharing mechanism to manage risks. Inga Beale, CEO of Lloyd’s, said the collaboration is essential to address the increasing gap in insurance and risk. “As technologies emerge on their own, the risks are becoming so big and complex that businesses and governments will not be able to handle them. With this initiative, we want to address that.” Lloyd’s has been joined by other insurers, reinsurers and brokers to support the WEF initiative. Theses include Allianz, Marsh & McLennan, Sompo Holdings, Swiss Re, Willis Towers Watson, XL Catlin and Zurich Insurance Group. They will work alongside technology companies Cisco, Hitachi, IBM and Siemens. Senior officials from the European Commission are also on board, together with governments in the UK, Switzerland, the Netherlands, US, India, Singapore and Japan. Prashanth Gangu, partner at Oliver Wyman, which helped to compile a report for the launch of the coalition, said technology risks pose a far bigger threat than natural catastrophes: “The world is changing as new technologies proliferate and the nature of risks facing individuals and the economy is morphing at an increasingly rapid pace. Society needs to be ready for events bigger than the more than $100bn loss estimates from Hurricanes Harvey, Irma, Maria, caused by risks in the global cyber-physical system: either errors in code, malicious hackers or AI gone wild.” Abel Lee, head of insurance and asset management at the WEF, said: “Given the emerging risks associated with applications of many new technologies that do not yet have social conventions and existing legal frameworks to stipulate the ‘rules of the game’, it is imperative for the insurance industry to work with governments, tech partners and other stakeholders to create a common taxonomy and clear definitions of risks and liabilities; collect and share available data to allow for efficient risk pooling, pricing and sharing; and unleash the potential of risk mitigation by utilising every aspect of the industry’s value chain.”

Insurers and government form WEF coalition to tackle tech risks

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