Declining trust in institutions, excess mortality variance, and the evolution of liability risks from digital technology are among the top structural risks in the industry, according to Swiss Re’s 2025 SONAR report, which “identifies new or changed risks that are difficult to quantify and could have major impact on society and industry.” Meanwhile, the top emerging risks include extreme heat, as well as disinformation and deepfakes that enable insurance fraud, the study finds.
Structural Risks
The report identifies several structural risks, such as declining consumer trust in institutions, including insurers; excess mortality variance, causing uncertainty for L&H claims and reserves; and digital technology as a liability, all of which are indicated to have a high impact on the industry. The medium-impact structural risks include social inflation risks that could expand liability claims and aging populations that put mortality protection products at risk.
Declining Trust in Institutions
Declining trust in institutions, according to Swiss Re, is driven by economic inflation; rising borrowing costs; regulatory restrictions; and growing natural catastrophe activity. “A sense of unfairness can erode trust,” states the report. “As many as 61% of respondents to the 2025 Edelman Trust Barometer expressed a moderate to high sense of grievance against businesses and governments. Forty percent went as far as to endorse hostile activism, including violence and damaging property, to drive change.”
A lack of trust in insurance carriers can strongly influence purchasing decisions, emphasizes the report. If consumers do not believe that insurers will pay out on claims submissions, or if insurers word their policies with complex language that is difficult to understand, trust dwindles. Fewer than two-thirds of consumers trust insurers, and “with losses from natural catastrophes rising by an annual long-term trend of 5-7% in inflation-adjusted terms, sustaining trust will require ongoing efforts.”
Excess Mortality Variance
“In the U.S. and U.K., excess mortality from COVID-19 is expected to remain positive at least until 2027, and possibly until 2033,” according to the report. “Recent experiences in the U.S. shows that life expectancy rose by 0.9 years to 78.4 in 2023, still slightly below the pre-pandemic high of 78.8.” High levels of excess mortality variance, however, are a possible challenge for life and health (L&H) insurance, with the potential for several years of elevated mortality claims ahead, the report states. Long-term performance of in-force life portfolios, as well as the pricing of new life policies, may be impacted.
The report also notes that weight loss medications, such as GLP-1, are becoming increasingly widespread for reducing obesity, therefore reducing mortality rates in the future; however, most regain the lost weight after stopping the medication. “In the long-term, positive mortality improvements will rely on advancements in cardiovascular disease and developments for the treatment of cancer. These remain…major causes of mortality and critical illness among the insured population,” notes the report.
Digital Technology: Mostly a Liability Insurance Story
“The evolution of digital technologies is reshaping the risk landscape and could prompt to more demand for first- and third-party liability covers,” the report states. Reported AI incidents have been increasing, with an over 60% increase from 2023 to 2024. An increase in lawsuits is to be expected as more people and companies adopt AI over time. The most recent litigation has been based on allegations of intellectual property infringement and defamation lawsuits, both of which could contribute to social inflation in the future.
“Newer approaches such as GenAI can also be vulnerable to sophisticated fraud like deepfakes, as well as heightened liability concerns,” the report emphasizes. The four risk categories are fairness, bias, and discrimination; legal and regulatory compliance; malicious use and safety; and unintended outcomes and malfunctioning products. “Over the years, the share of incidents due to fairness, bias, and discrimination has declined, while those of malicious use have risen,” states the report.
Social Inflation
Social inflation encapsulates “factors leading to increased insurance claims severity beyond that explained by economic drivers,” according to the report. “Over the past decade, such factors have accounted for 57% of the increase in liability claims in the U.S.” Since 2020 alone, the number of Nuclear Verdicts has more than quadrupled, while the median verdict value has more than doubled to [$]51 million. As a result, “U.S. liability lines exposed to bodily injury claims have seen profitability deteriorate over the five years to 2024, with cumulative underwriting losses mounting to [$]43 billion,” the report states.
Aging Populations: Mortality Protection Products at Risk
“The world’s aging population is being driven by increases in life expectancy and declining birth rate,” states the report. According to data from the United Nations (UN), “the share of persons aged 65 and above in high-income countries is forecast to trend up through to the mid-2040s. The number of 25- to 49-year-olds is expected to shrink 5% by 2050. As life events like birth of a child can spur life insurance purchases, a population that is aging implies lackluster growth in demand for mortality protection and accumulation savings premiums. Fewer and later family formations magnify this headwind.”
Emerging Risks
Emerging risks identified in the report included the insurance fallout from extreme heat, as well as deepfakes and disinformation that enable insurance fraud, both of which have a high impact. Medium impact risks include new frontiers in fungi-related loss potential and new technologies in healthcare delivery, while a low-impact risk is the expanding horizons of drone technology.
Extreme Heat
“Extreme heat poses a growing threat to the insurance industry, with property, specialty, and L&H business most exposed,” the report states. “It 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.”
Heat-related health impacts can also increase medical, life, and workers’ compensation claims, particularly among vulnerable and outdoor-working populations. With the year 2024 being the hottest year on record, extreme heat events are on the rise. In the U.S., heat wave frequency has increased from an average of two to six annually from the 2010s to 2020s, and the average length of heat waves has increased from three days in the 1960s to four days today.
Property and specialty insurance lines of business will be significantly impacted by extreme heat, with damage to corporate fixed assets driving annual losses of $404 billion to $448 billion annually across all listed companies by 2035. “Disruption to infrastructure systems such as power delivery and damage to roads, bridges, and buildings can bring property damage and also business interruption claims,” states the report. Furthermore, extreme heat can cause damage in regions that do not have infrastructure designed to withstand it, leaving transportation, water, energy, and more systems vulnerable to damage. Droughts and heatwaves can also increase the likelihood of wildfires.
“One study estimates that currently, around 489,000 people in the world die annually as a result of conditions of extreme heat,” states the report. “This makes the heat the deadliest natural peril, more so than floods, hurricanes, and earthquakes combined.”
Deepfakes and Disinformation
“Digital technology, including AI, can facilitate varied forms of criminal activity, including submission of fraudulent insurance claims,” states the report. “Insurers face heightened operational demands and costs to detect and mitigate the risks that deepfakes can bring,” while “AI can facilitate widespread disinformation that can erode trust in the insurance industry and impact legal proceedings.”
Deepfakes can include altered video footage and photos and edited documents, making it more challenging for insurers to verify the authenticity of claims. In fact, apps have been created to be used to manipulate real-life images, videos, and documents in motor claims, the report states.
Disinformation, defined as “the deliberate spread of inaccurate information,” is also a threat to the insurance industry. “Fake or misleading news can distort reality, complicating claims assessments and eroding trust both in institutions and potentially the insurance industry itself,” states the report. “AI-powered bots and trolls engage in coordinated disinformation campaigns that are difficult to detect and combat, especially if the disinformation is spread in social media groups.” The lines of business most impacted include specialty, casualty, and operations, with deepfake technology being a source of increased litigation and claims, as well as used as a cybercrime tool.
Fungi-Related Loss Potential
The report noted two main areas of fungi-related loss potential, with the first “on account of fungi adapting to and thriving in warmer temperatures, including in humans and other warm-blooded animals. The second is overuse of fungicides, leading to the development of more multi-drug-resistant fungal pathogens. Specialty insurers face elevated risks from crop losses and commodity disruptions, while property insurers may see more mold-related claims on account of flooding and damp conditions.” Meanwhile, casualty lines are “exposed to liability losses from product recall and environmental impairment claims, due to inadequate containment or misuse of fungicides.”
The report emphasizes that prevention is better than cure, and that the first step toward managing fungi-related risks is to monitor new and multi-drug-resistant outbreaks in agriculture and humans. Specialty, casualty, property, and L&H are the lines of business most impacted by fungi, the report notes.
New Technologies in Healthcare Delivery
“The changing face of healthcare delivery involves trends like electronic health records (EHR) being used for underwriting purposes, and AI in the design of tailor-made care regimes delivered by virtual assistants. Even surgery can be performed virtually, with physicians in one location involve real-time in surgical procedures taking place on the other side of the world.”
The lines of business most impacted are specialty, casualty, and L&H. Data security and privacy are a major concern in specialty, while in casualty, extended reality (XR) technology, including virtual reality (VR), augmented reality (AR), and mixed reality (MR) technologies, the report explains. Cases are mostly in their early stages, but the use of robotics in surgery could improve patient outcomes and operational efficiencies in the medical field.
Emerging risks identified as having an effect in the medium-term include plastics causing a new wave of litigation and emerging workforce gaps and skillset shortages, both medium-impact; as well as ultra-processed foods causing health and liability risks, which indicate low impact.