2018 SONAR report launch

Kera McDonald, CRO CorSo

Identifying and assessing emerging risks is key. It allows us to: • increase risk awareness, • protect the balance sheet, and • seize opportunities and enable risk taking.

Swiss Re’s Emerging Risk Process

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Global macro trends shape tomorrow’s risk landscape

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Swiss Re identifies and monitors macro trends in four dimensions which form thebackdrop for the SONAR report. This year Swiss Re has identified 23 global macro trends likely to have a significant impact over the next 5-10 years.

2018 emerging risk insights

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Asbestos reloaded – USD 100 billion in losses and counting

Millions of metric tons of asbestos are still being processed

300 million people in Europe and Central Asia potentially exposed

Latin America and other regions also at risk

Insurance consequences

Total asbestos exclusion could become the standard for the industry

Risk of underestimating impact of passive exposure to asbestos

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Impact: High

Time frame: >3 yearsSocietal Environment

Algorithms are only human too – opaque, biased, misled

Algorithms are susceptible to discriminatory bias

Black-box algorithms may conceal and perpetuate mistakes

Clear governance is lacking

Insurance consequences

Defective modelling may prove costly

Black-boxes may reinforce certain biases

Due to regulation, pricing tools can come under scrutiny

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Impact: HighTechnological & Natural Environment Time frame: >3 years

Eyes wide shut – the world is sleeping less

Two out of three losses globally are due to human failure

Lack of sleep is associated with increased rates of several diseases

Insurance consequences

Human error can impact already affected lines of business

Shift in mortality may impact life insurance

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Societal EnvironmentImpact: Medium

Time frame: >3 years

Paradise lost – the price of ecosystem services

Collapse of ecosystems include forests, wetland marsh, mangrove, freshwater sources, coral reefs

Barrier reef at risk as important asset for tourism/economy

Insurance consequences

Potential BI and supply chain disruption

The EU and the US have laws covering ecological damage

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Impact: MediumTechnological & Natural Environment Time frame: >3 years

Fed up? – Uncertain future of monetary policy regimes

Debate is about the fundamental objectives of monetary policy

Consequences of regime change are difficult to anticipate

Insurance consequences

Clear framework shift could bring long-term impact on financial stability

Uncertainty could raise risk aversion

Unexpected and sustained inflation increase would harm re/insurance industry

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Impact: MediumPolitical Environment

Time frame: >3 years

Your printed heart – longer lives for artificial organs?

Artificial organs are ever more supplementing human donation

Innovative solutions are emerging rapidly, such as 3D-bioprinting

Insurance consequences

Unclear legal definitions of artificial organ transplants

Regulatory uncertainty regarding impact on liability

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Societal EnvironmentImpact: Low

Time frame: >3 years

Precious information: Market conduct and ethics in the age of big data

In May 2018, the European Union enacted GDPR which sets standards within and beyond EU

GDPR is strengthening individuals’ rights in the digital economy

GDPR means accepting accountability with personal data

Fair data conduct can become a competitive advantage

Ethical handling of data will be an important topic

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Appendix

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The 2018 edition of Swiss Re SONAR presents 18 new emerging risk themes

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Most affected business areas

Potential Impact

2018 Swiss Re SONAR report: 7 trend spotlights

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Emerging trend spotlights highlight current developments which we deem relevant to follow, although they have not yet materialised into risks.

Insatiable demand for energy: Infrastructure in transition

New realities: VR and AR tech gaining traction

Testing phase: InsurTech in Asia The future is genomic: Moving towards precision medicine

The backbone of the 21st century: Supplies of metals and minerals

Precious information: Market conduct and ethics in the age of big data

Hamstrung?: The risks of heavy government debt

What are emerging risks?We define emerging risks as newly developing or changing risks that are difficult to quantify and could have a major impact on society and industry.

What is SONAR?SONAR stands for systematic observation of notions associated with risk. It is Swiss Re‘s tool for identifying, assessing and managing emerging risks. Experts across the company use a web-based platform to collect early signals of emerging risks. All signals are assessed and prioritised by an emerging risk management team which closely interacts with topical experts from Swiss Re‘s various business areas. The findings are regularly shared internally and summarised for external audiences here.

What are emerging risk insights?Emerging risk insights illustrate potential new threats for the insurance industry. They are mainly derived from SONAR but also draw on other sources. All insights have been assessed and edited by Swiss Re‘s emerging risk management experts. The 2017 Swiss Re SONAR report features only new emerging risk insights, i.e. topics covered in previous editions are not listed again. Prior reports can be retrieved from our webpage: http://www.swissre.com/library/editors-pick/swiss_re_sonar_new_emerging_risks_insights_2017.html

What is meant by overall impact?The overall impact is an indicator of the potential financial, reputational and/or regulatory impact associated with an emerging risk topic. It is assessed on a scale from high to low.

What is meant by time frame?We divide themes into those likely to occur in less than three years and those likely to occur later. This should not be used as an indicator of when action is needed, as some themes likely to occur in the more distant future may, nonetheless, require immediate action to prepare.

Terms and definitions

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Legal notice

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©2018 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re.

The information and opinions contained in the presentation are provided as at the date of the presentation and are subject to change without notice. Although the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage or loss resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial or consequential loss relating to this presentation.