A message Swiss Re SONAR 2025 is a key information resource that provides businesses and insurers with timely insights into new or changing risks, which are difficult to quantify, but may have significant impact on society and industry. Its aim is to help make more informed strategic decisions. The report divides risks into two main categories: structural risks, which are already affecting markets today, and emerging risks, which are either analyzed in depth (deep dives) or signal new exposures.

Between structural risks, which are already shaping insurance markets, include several key factors:

• Lack of consumer confidence in an industry that challenges the core value proposition of insurance. Surveys show that less than two-thirds of consumers trust insurance companies, which makes it difficult to close deals and can lead to reputational risks.
• Social inflation, which is a burden on the profitability of the liability insurance industry, especially in the US. It is defined as factors leading to an increase in the severity of insured events beyond the economic impacts and has caused a 57% increase in liability insurance claims in the US over the past decade.
• Increased mortality persisting after COVID-19, which poses a challenge for life and health (L&H) insurance and affects the creation of reserves and the pricing of new policies.
• Aging population, which is a global trend due to increasing life expectancy and declining birth rates, which may limit demand for mortality protection products, but also represents an opportunity for insurance companies in the field of longevity and old age security.
• Digitization, which is changing the risk landscape and may increase the demand for liability coverage, with a growing number of artificial intelligence (AI) incidents and potential litigation related to intellectual property infringement or reputational damage.

The report analyzes in detail three emerging risks with deep dive:

• Extreme heat: With the expected increase in extreme heat events, with 2024 already confirmed as the hottest year on record, many insurance claims are expected. This includes increased accidents, illnesses, chronic conditions and deaths, which increases health insurance costs and strains healthcare systems. Heat waves also damage infrastructure and increase the risk of fires. There is also a growing number of lawsuits against entities accused of insufficient action or contribution to climate change.
• New mushroom-related loss limits: Fungi are adapting to warmer temperatures, which could lead to an increase in property insurance claims due to fungal infestations. In addition, the overuse of fungicides in agriculture and the development of multi-resistant strains of fungal infections could drastically reduce crop yields, which will impact agricultural insurance. For L&H insurers, the spread of drug-resistant fungal infections represents a growing risk to vulnerable populations, potentially increasing morbidity and mortality rates.
• Plastic waste – a new wave of lawsuits?: Plastics and their particles have already sparked litigation for environmental pollution and harm to human health. Advances in attribution science that suggest causal links between plastics and adverse health outcomes (e.g. accumulation of micro- and nano-particles in the body) could lead to a significant increase in litigation in many sectors, particularly in the area of liability insurance.

The report also draws attention to new risks with potentially lower but long-term impact:

• Highly processed foods (UPF): The growing consumption of UPF may lead to an increase in liability and health insurance claims as evidence accumulates about their negative health consequences, such as obesity and diabetes.
• Digital innovations how deepfakes and disinformation spread through social media can impact L&H and liability insurance companies, for example through insurance fraud or breach of trust.
• The growing role of digital technology in healthcare delivery: From electronic health records (EHRs) to AI in personalized care regimens and remote surgeries, new technologies bring challenges in cyber insurance, medical liability and operational costs.
• Emerging workforce and skills shortages: An aging population and the rapid transformation of jobs due to AI may lead to skills shortages in critical industries such as healthcare, which may increase L&H and liability insurance claims.
• The expanding horizons of drone technology: New applications of drones, such as on the battlefield or for strategic purposes, bring risks to airspace, critical infrastructure and commerce, as well as privacy concerns, but also open up new insurance opportunities.

SONAR 2025 is a valuable tool for the insurance industry, highlighting the complex and interconnected nature of future challenges. By providing timely insights into risk developments, it helps insurers and businesses make better-informed strategic decisions and prepare for the changing risk landscape. Spring