Page 38 - Insurance Times June 2024

and transactions between two or more distinct groups, physical damage to either owned or contingent
commonly referred to as "users" or "participants." property.
Platform-based companies in the sharing economy 2. Technology failures: In the current business
benefit from low operational expenses because they do
environment, every company is heavily reliant on
not incur inventory expenses associated with traditional technology and interconnectedness. The adoption of
businesses. This shift has given rise to new business and technologies and concepts such as big data, cloud
employment models such as gig work and sole
computing, internet-of-things, artificial intelligence,
proprietorship, which involve blending personal and APIfication, appification, platformization, and digital
commercial insurance lines-an aspect not previously transformation has significantly altered the way
anticipated in the traditional business world.
businesses operate. In such an ecosystem, any
technology failure event-such as network failure, IT and
Changing risk environment telecommunication outages, cloud downtime, slow
In addition to changes in the business environment, the risk internet connectivity, or even electricity blackouts-could
landscape in which businesses operate has evolved due to result in substantial losses for businesses.
various risk factors (see Figure 2). These include climate 3. Cyber risk: The heavy reliance on digital assets and
change and weather events, technology failures, cyber risks, technology has expanded the risk landscape, rendering
geopolitical tensions, and regulatory interventions. businesses more susceptible to cyber-attacks. Cyber
incidents such as hacking, malware,
and ransomware can result in the loss
of sensitive data, denial of service or
access, and disruption of business
operations. In contemporary times,
real-world conflicts and acts of
terrorism are increasingly manifesting
as cyber-attacks on business networks.
With the maturation of new
technologies such as cyber-physical
systems, autonomous decision-making
systems, and quantum computing, the
cyber risk is poised to escalate multiple
times beyond what has been
Figure 2: Changing risk environment. experienced thus far.
4. Geopolitical and terrorism: The geopolitical landscape,
1. Climate change and weather events: Climate change historically characterized by flux, is evolving towards
refers to long-term shifts in global or regional weather multipolarity. Economic rivalries, dominance aspirations,
patterns and average temperatures. Unlike weather and shifting alliances are redrawing battle lines. In such
changes that occur on shorter timescales, climate a dynamic environment, government actions, tariffs,
events unfold over decades or even longer periods. The sanctions, labor disputes, trade barriers, or organized
impacts of climate change manifest in various ways, blockades affecting market access can significantly
including increased global surface temperatures, impact business operations. Geopolitical tensions, trade
melting polar ice caps, rising sea levels, alterations in disputes, or conflicts have the potential to disrupt global
precipitation and weather patterns, and extreme supply chains, resulting in delays, shortages, and
weather events such as hurricanes, heatwaves, increased costs for businesses reliant on international
droughts, floods, and wildfires. The frequency and trade. The closure of a port or blockade of a trade route
severity of these events have been on the rise in recent could create chaos within the supply chain. Companies
decades. While weather events are known to directly may encounter difficulties in sourcing raw materials,
cause physical damage, in the evolving business components, or finished goods from regions affected by
landscape, business interruption can occur without social unrest. Changes in geopolitical alliances can also

The Insurance Times June 2024 35