Swiss Re expects more cascading effects from natural catastrophes
Published: Wednesday, Jun 12th 2024, 10:20
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Natural disasters can not only cause extensive damage to property and claim lives. They also pose further risks due to cascading effects, such as interruptions to the water supply, damage to power grids or disruption to transport networks.
If power failures paralyze entire production lines, production comes to a standstill, materials spoil and deliveries are delayed, according to the "Sonar" study published by Swiss Re on Wednesday. "As soon as critical infrastructure and supply chains are affected, the losses can become immense."
Vulnerable supply chains
The reinsurer also sees further risks in the decreasing resilience of supply chains. Following the disruptions caused by the Covid-19 pandemic, the security of supply chains has become a priority for companies. However, cost savings have since returned to the forefront.
"Not only has cost pressure increased, but the risks to supply chains have also increased, as the crisis in the Red Sea shows," says Swiss Re. The reinsurer expects key transportation routes around the globe to become less secure due to the more volatile geopolitical situation, but also the increase in extreme weather events, economic uncertainty and increased cyber and technology risks.
Underfunded healthcare system
The "Sonar" report identifies a further danger in the underfunding of the public healthcare system. This could lead to higher morbidity and mortality rates, particularly in a future pandemic. Increased absenteeism due to illness and staff shortages also put a strain on the economy. "The underfunding of the healthcare system and its effects are worrying in countries at all income levels," the report states.
Swiss Re's "Sonar" report is published for the twelfth time. The current edition presents a total of 16 new risks and their potential impact on the insurance industry and society.
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