Sporing reigns
Fungal spread and killer heatwaves feature in this year’s emerging risk run-down from Swiss Re
By Andy Swales
In HBO’s hit show The Last of Us, the world has been plunged into chaos by the spread of the cordyceps “zombie fungus”, leaving a ruined landscape populated by infected mutants and small bands of survivors – some of whom prove much worse than the monsters.
Thankfully – in this case at least – life is not yet imitating art. But Swiss Re’s latest Sonar report on emerging risks does feature an entry guaranteed to catch the eye of anyone who has watched the show or played the video game that spawned it: “fungal threats”.
The global reinsurer says it sees two “new frontiers in fungi-associated loss potential” for the insurance industry.
“The first on account of fungi adapting to and thriving in warmer temperatures, including in humans and other warm-blooded animals. The second, overuse of fungicides, leading to the development of more multi-drug-resistant fungal pathogens.”
Fortunately, zombification is not on the radar. But Swiss Re flags fungal growth as a medium-impact, short-term threat.
“Specialty insurers face elevated risks from crop losses and commodity disruptions, while property insurers may see more mould-related claims on account of flooding and damp conditions,” it says.
“Casualty lines are exposed to liability from product recall and environmental impairment due to inadequate containment or misuse of fungicides.”
The issue dates to the 1960s’ “green revolution” in crop production, Swiss Re says. This period “promoted cultivation of fewer food crops and crop varieties on larger plots of land. This has led to the scenario in which key staples, cereals and root crops have high genetic uniformity, which in turn has facilitated rapid spread of fungi.
“The response of overuse of fungicides in agriculture has only led to more virulent strains.”
The report says fungal diseases cause up to 23% of global harvest losses each year, and there are already cases of drug-resistant strains limiting medical treatment options for affected people.
“While currently still on small scale, the development of … resistance to drugs could contribute to higher mortality rates, perhaps more so during natural disasters and [amid] other disease outbreaks.”
Heatwaves and crime waves
This year’s report flags two high-impact, short-term emerging risks: extreme heat; and deepfakes and misinformation.
Noting that 2024 set yet another “hottest year” record, the reinsurer warns extreme heat “increases the risk of electrical outages and wildfire risk, and can damage and cause disruption to transport, water and energy infrastructure, thus driving up property and specialty claims”.
Of course, warnings on the growing impacts of global heating are nothing new, but they bear repeating. From June 2023 to April last year, there were 76 heatwaves across 90 countries, the report says.
“More than 6 billion people (about 78% of the global population) experienced at least 31 days of extreme heat. Since 1991, such conditions have become twice as likely to occur.”
Swiss Re flags impacts on industries including energy (blackouts), transport (infrastructure damage), telecommunications (overheating data centres and “fixed asset losses projected at $US518-$US563 million a year by 2035”), construction (warped materials) and agriculture.
And since no risk exists in isolation, global heating also feeds the fungal threat.
“One outcome of warming climates could be more severe and frequent flood and storm surge events … Water and damp conditions in buildings fosters growth of toxic mould, even more so in warmer temperatures.
“As more areas become susceptible to flooding and damp, so too will more properties (private and commercial) be vulnerable to mould.”
On deepfakes, the report says new technology can “create convincing but false evidence” such as altered video footage or documents, meaning claims are harder to authenticate.
“Concurrent with rising numbers and total value of fraudulent claims in the UK, insurers report rapidly rising use of deepfakes in claims fraud with a skew towards low-value claims.
“Apps have been used to manipulate real-life images, videos and documents in motor claims. Paper-based claims submissions have been affected.”
Disinformation – “the deliberate spread of inaccurate information” – is also flagged as an evolving operational and reputational threat for the industry.
The paper says a reliable information environment is crucial for insurers, but “fake or misleading news can distort reality, complicating claim assessments and eroding trust both in institutions and potentially the insurance industry itself.
AI-powered bots and trolls engage in co-ordinated disinformation campaigns that are difficult to detect and combat, especially if disinformation is spread in social media groups.”
Plastic: not fantastic
Swiss Re says “widespread use and poor disposal of plastics” is driving litigation across several lines of business.
“Alongside evolving legal frameworks, scientific advances regarding causation and source attribution could spark a rapid increase in environmental and product liability claims against plastic producers, users and waste managers,” the report says.
“Insurers may see rising demand for pollution-related coverage amid tightening regulations.”
Swiss Re says global production of plastics is tipped to reach 736 million tonnes by 2040, up 70% on 2020.
Plastic pollution is a well-known – and huge – problem, but the report also points to a more recent area of concern: microplastics created by larger items’ slow decomposition.
“Large amounts of microplastics originate from tyre wear and from paints. Plastic particles are produced for commercial applications, such as in cosmetics and personal care products (microbeads).
“Increasingly, micro- and nanoplastics are being found in the environment, in waterways, food chains and even in geological formations.”
There has also been research into the potential harm to people. “Findings include increasing presence of plastic particles in the body, including in the digestive system, blood stream, liver, kidney and even the brain. Unsurprisingly, public concern is also rising.”
The report says international and national moves to curb production and promote recycling and plastic substitutes have created a complex regulatory environment.
“That authorities in different jurisdictions are pushing in different directions could see a rise in cases of plastics-related climate change litigation.”
Among the other emerging risks featured in the report are structural threats including declining consumer trust in institutions, and social inflation affecting liability payouts.
The “expanding horizons of drone technology” is a short-term issue, and skills gaps that could drive up workplace injury claims are rated medium-impact over the medium term.
The Sonar report identifies “new or changed risks that are difficult to quantify and could have a major impact on society and industry”.
It draws on “horizon scanning through monitoring tools”, in-house vetting and input from external scientists, clients and industry peers.
