Howden Re’s Flandro: Biggest emerging risks in next five years will be 'unknown unknowns'

By Isha Marathe

June 4 - (The Insurer) - War risk on multiple continents, ramped up storm and wildfire frequency and a simmering trade war creates uncertainty for the insurance industry, but it also means a fair amount of opportunity to invest in emerging risks, said Howden Re head of industry analysis and strategic advisory, David Flandro, at the Insurtech Insights 2025 conference.

While trending technology like generative AI might be a meaningful investment today, Flandro said the “unknown unknowns” like asset risk after the Great Recession or trade risk after the COVID-19 pandemic, are often where the key emerging risks lie. “Unknown unknowns” is a concept that was brought to public attention by then Secretary of Defense Donald Rumsfeld in 2022.

“The tail that has wagged the dog has been stuff that we haven’t been thinking about. There is no linear trajectory,” Flandro said.

“The things we are all talking about now probably won’t be the things that affect us most in the next five years.”

CLIMATE-RELATED RISKS

Ruth Foxe Blader, the founder and managing partner of Foxe Capital, said while “we do not know what’s coming, there is a prize for those who embrace it.”

Despite the uncertainty and heightened risk environment, there are certain areas to keep an eye on today that may hint at emerging risks in the future, Blader said.

“For me, one of the biggest and most exciting things happening in our space right now is the ability to link prevention and mitigation with emerging risks,” she said.

Blader believes products related to wildfire mitigation are a top avenue for investment.

“Climate change (is) a known risk that we do not understand. All we know is that it’s getting worse,” she said.

“There are also a number of startups in the prevention space… and if you link (those) with an insurance broker that deeply understands risk and can find insurance with these people who genuinely cannot get insurance… that can change the industry.”

MGAs AND CONSUMER PARTNERSHIP

However, technology is not always the only way to focus on mitigation and prevention when it comes to the unknown risks of the changing climate.

“Probably the biggest tool that we feel that insurers have to help prevent is not any one technology (but) the consumer,” said George Hosfield, vice president and general manager of home insurance solutions at LexisNexis.

“The consumer is potentially a willing partner in helping to prevent claims, to fortify homes and to change their way of life to an extent where it protects their biggest asset.”

Another key component of managing the emerging risks that insurers are just catching up with are managing general agents.

“MGAs have played a huge part in filling (the) gaps with emerging risk over the last few years,” Flandro said.

“In an environment where there is limited capacity for things like California wildfire in the admitted market, or other emerging risks, MGAs have become a key tool for filling that loss gap.”

In the coming months, Blader hopes that the industry will add more tech and third-party interlocutors that will change how prevention is factored into emerging risk.

“We've talked about prevention and services versus products and things like that for a super long time, but actually effectuating that at the underwriting (and) the pricing level (by) actually providing credit on the insurance premium for prevention and mitigation has not really happened,” she said.

“(But we are starting to see) this emerging tech innovation side to make the case for getting these credits.”