Caught in flux: how geopolitics and climate change are forcing re/insurers to rethink risk

The intricate web of economic and environmental challenges facing the world today is unprecedented, yet there has never been a better time for re/insurers to recalibrate their approach to risk.

Adam Carrier, head of consulting for crisis management at Gallagher, spoke exclusively to Intelligent Insurer’s AIRMIC Today, to offer a piercing analysis of today’s risk environment. 

Carrier began by acknowledging that “we are definitely in a period where the assumptions the world order has been built on since the Second World War no longer apply. 

“We're in the fluid period before the New World Order – and whatever that will look like – starts to reveal itself.”

This transitional phase, marked by increased geopolitical and economic volatility, demands businesses and insurers pivot from a focus on immediate events to a more overarching understanding of their specific operating environments. 

“Otherwise,” Carrier cautioned, “you might spend all your time discussing China-Taiwan while a coup in South America disrupts your critical supply chain.”

Carrier’s emphasis on localised risk highlights the necessity of forward-looking intelligence, and he remarked: “Everywhere is much in flux at the moment. You need to understand your environment specifically and how it's changing. 

Without this, he believes the industry risks being blindsided by developments far more consequential to business operations than headline-grabbing geopolitical events.

“Everywhere is much in flux at the moment. You need to understand your environment specifically and how it's changing”

Agility in a fragmented world

As the world becomes increasingly multipolar, Carrier stressed the evolving role of insurers in helping clients navigate these turbulent times, arguing that “the breakdown in international conflict resolution mechanisms” has heightened risks across the board. 

“We’re no longer in a unipolar world where the US could broadly mitigate regional conflicts,” he observed.

Today, with competing blocs and fragmented agendas, conflict risk has increased substantially and Carrier identified climate change as a crucial accelerant of political instability. 

He cited examples such as water scarcity and heatwaves driving migration and local conflicts in equatorial regions, and explained how resource disputes exacerbated tensions, such as the Nile water disputes between Egypt and Ethiopia.

“Resource scarcity is absolutely becoming a more significant factor in geopolitical tensions globally,” he warned. 

For insurers, this means offering products that address both first-order risks, such as property damage, and second-order risks including political violence and supply chain disruptions. 

“Insurers should help clients understand and mitigate these dual threats,” he advised.

Carrier’s insights extend beyond diagnosis to actionable advice for businesses; he underscored the need for proactive crisis management strategies, grounded in robust situational awareness and agile decision-making frameworks. 

“You can’t get away with an annual risk assessment any more,” he stated. “Clients need data and analysis to remain agile and ensure their crisis management strategies are effective.”

The cost of complacency

One of Carrier’s key recommendations is fostering a culture of continual planning. Quoting General Eisenhower, he noted: “Plans are nothing, but planning is everything.

“Crisis management isn’t about having a dusty playbook sitting on a shelf; it’s about understanding where you’re exposed, simulating potential crises and building the muscle memory to respond effectively.”

Additionally, he highlighted the critical importance of risk intelligence: “Developing key risk indicators and monitoring them allows businesses to act pre-emptively. Without the right intelligence, you’re always scrambling.” 

Carrier illustrated this with a case where clients with business processing offices in India were prepared for potential escalations between India and Pakistan. “Those who planned were ready to act when tensions rose, while others were left panicking,” he recalled.

Carrier’s remarks serve as a wake-up call for businesses that still adopt a reactive approach to crises. “Little by little, companies are becoming more proactive,” he acknowledged. “But often, it’s because they’ve recently experienced a significant incident. Reactivity is still the norm in many industries.”