Insurers have been warned by Broadstone, a pensions, employee benefits, investment, and insurance consultancy, to explicitly quantify geopolitical risk in their pricing, modeling, and risk management processes. The consultancy’s latest Insurance Risk Monitor states that the current decade is shaping up to be one of the most unprecedented in recent memory, with conflicts in Ukraine and the Middle East, and autocratic nations forming alliances, threatening to push democracies to “breaking point”. Insurers face the complex task of estimating the likelihood of further risks, including escalation of wars, civil war in the US, and a major cyber attack, which could lead to a reduction in risk-taking, trading losses, and a slowdown in the global economy. To mitigate these risks, insurers can undertake scenario analysis, use actuarial techniques, and assess their Solvency Capital Requirement calculation.
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