Aftershocks Swiss Re’s annual Sonar report on emerging global risks looks beyond the darkest days of the pandemic
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bout this time last year, the foreword to Swiss Re’s Sonar report included a suitably sombre told-you-so: the reinsurance giant’s annual run-down of emerging global risks had flagged pandemic threats on at least three occasions since its inception in 2013. A year on – and with the vaccines slowly rolling out – Sonar 2021 looks beyond the coronavirus crisis, focusing on some of the flow-on risks, plus a handful of other threats worth tracking as all eyes, hopefully, begin to turn away from COVID-19. As Swiss Re’s Chief Risk Officer Patrick Raaflaub notes, it is important not to lose sight of the dangers that were already looming – particularly the existential ones. “When COVID-19 emerged in late 2019, few could have predicted the magnitude of its impact,” he says. “Many of the actions taken to mitigate the pandemic have themselves created new risks. “As (re)insurers, it is essential that we have the best possible understanding of these emerging risks. “It is also important to remain vigilant on the emerging risks that are already known – especially regarding climate change – as these will impact us for years to come.”
44 insuranceNEWS
August/September 2021
Stop-start One of the most high-impact threats flagged in Sonar 2021 flows from the pandemic and, more specifically, the global recession it triggered. As Swiss Re acknowledges: “Typical industry [pandemic] models had focused on potential mortality … yet, many impacts of the COVID-19 pandemic specifically relate to the sudden lockdown measures-induced halt to global economic activity to an extent that had not been foreseen.” The report notes that in the global oilfield services industry, maintenance budgets were cut by $US20 billion last year as belts tightened, while facilities such as chemical plants, mines and power plants have been similarly affected. “A consequence of a global economy in trouble has been a squeeze on maintenance budgets in many industries, and a delay to planned works. “Across many industries, as a savings measure, the choice has been to mothball facilities rather than use the downtime for maintenance. “In addition, qualified and experienced staff have either been laid off and/or, due to restrictions on mobility in lockdown, not
able to travel to sites of work.” Restarting a mothballed facility comes with acute risk. In the refining, petrochemical and chemical industries, research shows up to half of process safety incidents or major losses occur during start-ups following shutdowns. The rush to restart while budgets are still depressed may heighten the risk, Swiss Re says. And the same danger applies to industries not involving hazardous materials, such as aviation. “Planes that have been mothballed will be reactivated as demand for air travel picks up…pilots will resume work after a long period of no or less flying time,” Swiss Re says. “Human error accounts for two-thirds of root causes in aviation and other man-made accidents, and rusty flying skills as carriers ramp up their operations could be an additional risk.” General insurers are urged to focus on “three pillars” – adequate funding, time and the availability of experienced and qualified staff – as client companies return to normal post-pandemic conditions. As the Sonar report notes in a separate entry on the storage of hazardous materials in urban areas, we need not look back far to see the potential consequences of industrial
