Joy Agwunobi
The global insurance and financial services industries are increasingly being positioned as critical pillars of resilience as the world faces a more complex mix of climate, cyber, geopolitical and longevity-related risks.
According to insights from a recent cross-disciplinary workshop convened by TheCityUK and the World Economic Forum (WEF) in London, the future growth and relevance of insurance and finance will depend heavily on how effectively the sectors deploy technology, innovate risk models and work with policymakers to create harmonised regulatory frameworks.
Industry leaders at the workshop agreed that insurance and finance are no longer just risk-transfer mechanisms but essential enablers of stability, adaptation and long-term economic growth. As the world moves deeper into the second quarter of the 21st century, participants noted that societies are facing a convergence of risks that are broader, more interconnected and harder to model than before. These include the escalating impacts of climate change, intensifying geopolitical tensions, increasingly sophisticated cyber threats and the financial implications of ageing populations.
Despite their diversity, these challenges share a common requirement: stronger resilience. According to the WEF, another unifying factor is the expanding potential of new technologies and innovative business models that are reshaping how insurers understand, price and manage risk.
These themes formed the core of discussions at the London workshop, which brought together insurance executives, financial leaders and policymakers to explore how innovation, policy alignment and cross-border cooperation can unlock a new phase of growth for the sector. Participants stressed that while the industry is developing powerful tools to respond to emerging risks, their effectiveness will be limited without deeper collaboration with regulators and governments.
A central concern raised at the workshop was the widening global protection gap, defined as the difference between total economic losses and the portion that is insured. This gap has long troubled insurers and policymakers, but it is becoming more pronounced as climate-related disasters intensify and traditional insurance models struggle with affordability and scalability.
The WEF noted that if insurance premiums continue to rise beyond the reach of households and businesses, insurers may be forced to withdraw from certain high-risk markets altogether. This would leave communities more exposed and undermine broader resilience efforts. Addressing this challenge, participants argued, will require a fundamental rethinking of how insurance is delivered.
Technology and innovation were identified as key levers for closing this gap. Advances in data collection, analytics and automation are already improving efficiency and reducing operational costs across the insurance value chain. For instance, the use of drones after natural disasters is enabling faster and safer damage assessments, particularly in hard-to-reach areas. When combined with satellite imagery, which provides extensive historical and geographic coverage, insurers can conduct more comprehensive and accurate risk assessments.
This integration of satellite and drone data is not only improving underwriting accuracy but also accelerating claims settlement, allowing policyholders to rebuild homes and businesses more quickly after disasters. According to workshop participants, such efficiency gains are critical to restoring trust in insurance as a reliable safety net.
Beyond these operational improvements, the workshop highlighted parametric insurance as one of the most promising innovations reshaping risk coverage. As traditional property insurance becomes increasingly expensive and less accessible in disaster-prone regions, parametric products are emerging as a viable alternative. Unlike conventional insurance, parametric cover pays out automatically when predefined triggers such as wind speed or storm intensity are met, eliminating the need for lengthy loss assessments.
This model significantly reduces underwriting and claims adjustment costs, making coverage more affordable and predictable. At the same time, specialist insurance markets designed to cover particularly complex or high-risk exposures, such as properties vulnerable to severe weather, continue to expand.
Dawn Miller, chief commercial officer at Lloyd’s, described parametric insurance as one of the most transformative innovations to emerge from the Lloyd’s Lab insurtech accelerator. She noted that beyond natural catastrophes, parametric models are increasingly being applied to risks such as IT outages and fragile supply chains.
“Lab firms like Parametrix and Otonomi are proving how parametric models can address IT outages and fragile supply chains, leveraging automation and algorithmic underwriting to accelerate recovery and boost efficiency,” Miller said, highlighting how these solutions are extending insurance relevance into new risk domains.
However, participants were clear that efficiency gains alone will not be sufficient to meet the scale and complexity of today’s challenges. As a result, many insurers are redefining their role, shifting from a purely reactive posture towards prediction, prevention and early intervention.
Artificial intelligence and predictive modelling were identified as central to this transition. By analysing vast datasets in real time, insurers can anticipate system failures, detect fraud earlier, identify cyber threats and automate responses before losses escalate. This proactive approach, participants argued, represents a fundamental shift from hindsight-based insurance to foresight-driven risk management.
Yet, realising this potential depends on access to large, diverse and globally connected datasets. Workshop participants warned that increasing regulatory fragmentation, particularly around data localisation and digital sovereignty, is impeding the free flow of data required for effective predictive modelling. Without global data integration, insurers may struggle to fully leverage AI-driven risk prevention strategies.
At the same time, the growing adoption of AI across financial services is introducing new risks that insurers themselves must help manage. Questions around liability for AI-generated errors remain unresolved, while AI systems are also expected to increase both the volume and sophistication of cyber-attacks. Cyber risk, participants noted, is rapidly emerging as a systemic threat with implications far beyond individual firms.
Sara Farrup, head of global markets at AXIS Capital, said innovation is no longer optional for the insurance industry. She argued that insurers have the tools, data and expertise to play a more active role in developing long-term solutions to the world’s fastest-evolving risks.
“Insurance is shifting from hindsight to real-time foresight,” Farrup said, adding that by strengthening data ingestion, fusing AI with event-based systemic modelling and investing in underwriting expertise, insurers can deliver more holistic protection across climate and cyber risks while supporting global resilience.
Beyond risk mitigation, the workshop also underscored the broader economic role of insurance as a de-risking mechanism for investment. In collaboration with the wider financial sector, insurance enables growth and transition by making large-scale projects bankable.
Participants noted that climate finance initiatives have often underestimated the importance of insurance. Capital, they argued, cannot be deployed effectively for climate adaptation or mitigation unless projects can be insured. For example, insurance solutions are already being used to reduce the cost of capital for carbon capture and storage projects, which face complex and unfamiliar risk profiles as new value chains emerge.
Despite the industry’s readiness to expand its impact, regulatory barriers remain a significant constraint. Some stem from legacy frameworks that are poorly suited to new risk types, while others reflect a newer wave of regulatory divergence that threatens global competition and innovation. These barriers were grouped into key areas, including data governance and digital identity, AI and technology standards, sustainability and ESG requirements, and emerging geoeconomic measures.
Workshop participants stressed that addressing these challenges will require governments and regulators to work more closely with insurance and finance leaders to harmonise rules across jurisdictions and reduce unnecessary complexity. Long-term policy consistency and predictability were described as essential for unlocking investment and innovation, particularly for risks that evolve over decades rather than political cycles.
According to the WEF, short-term regulatory thinking will not provide the confidence investors need to support large-scale, long-horizon solutions. Instead, greater international cooperation and aligned regulatory frameworks are required to create a predictable environment that encourages innovation and the effective deployment of insurance solutions globally.
The workshop concluded that the time for action is now. If policymakers and industry leaders can align early, the insurance and finance sectors can play a decisive role in delivering resilience, stability and sustainable growth in an increasingly uncertain world.
