Overview
Global risks are becoming more tightly connected as financial pressures, artificial intelligence, geopolitical tensions, natural catastrophes, demographic change and dependence on critical infrastructure increasingly interact. These links create more routes for an initial disruption to spread through businesses, economies and financial systems.
New research from Swiss Re Institute and the London School of Economics and Political Science examines how those connections affect the ability of systems to withstand major shocks. The study builds on earlier work examining how risks accumulate, interact and strengthen each other’s effects.
The report focuses on four connected areas: the financial system, digital infrastructure, natural hazards and the wider socio-economic environment. Its main conclusion is that the damage from a future crisis might depend less on the size of the first shock and more on how quickly it spreads, where exposures are concentrated and whether affected systems are able to absorb and distribute losses.
Key highlights
- Global risks are becoming more connected across finance, digital infrastructure, natural hazards and the wider socio-economic environment. A disruption in one area can spread quickly into others.
- Swiss Re Institute found the average number of connections between risks disclosed by 91 large US-based multinational companies increased 24% since 2019.
- Concentration creates larger accumulation risks. Three companies controlled 70% of global cloud infrastructure in 2024, while 88% of Taiwan’s semiconductor plants are located in areas exposed to extreme seismic risk.
- Natural catastrophes can create losses far beyond direct physical damage when critical infrastructure such as power networks, data centres or semiconductor facilities is affected.
- Re/insurers have a growing role in identifying common dependencies, modelling loss accumulation and distributing risk through reinsurance, insurance-linked securities and public-private arrangements.
86% of leaders now rate operational challenges as high impact, up from 61% last year, as businesses deal with the practical consequences of managing multiple pressures at once.
The biggest pressure points include technology implementation and systems integration (72%), alongside skills shortages and transformation risk, showing how wider external disruption is increasingly playing out through delivery, execution and business change.
Growing risk connections create new vulnerabilities
Swiss Re Institute analysed risk disclosures from 91 large US-based multinational companies to track how corporate concerns have changed since COVID-19. AI and new technology, climate change and social instability now appear in the disclosures of a wider group of companies, while the average number of identified connections between risks has risen 24% since 2019.
Greater concentration adds another problem
Three companies controlled 70% of global cloud infrastructure in 2024, while 88% of Taiwan’s semiconductor plants are located in areas exposed to extreme seismic risk. A disruption at one major provider or production hub therefore has the potential to affect companies, sectors and countries far beyond the original point of failure.
The global economy is entering the largest infrastructure investment cycle in modern history, according to Beinsure. Allianz estimates that annual spending must reach about $4.2 tn through 2035, equal to 3.5% of global GDP.
The target addresses gaps in transport, energy, social infrastructure and digital systems. These aren’t marginal upgrades. They define whether economies keep pace with urbanisation, electrification and data demand.
Allianz estimates total global infrastructure needs at $11.5tn by 2035. Emerging markets account for nearly two-thirds of expected demand.
Natural catastrophes show how those exposures spread
Rising exposure is already the main driver behind higher insured natural catastrophe losses, but physical damage becomes more serious when an event hits infrastructure used by many other parts of the economy.
Damage to a data centre, power network or semiconductor production hub could interrupt operations and supply chains while producing claims across several insurance lines.
- Verisk raised its global insured catastrophe loss benchmark to $171 bn, with the US accounting for $117 bn and severe thunderstorms leading modeled risk.
- Insured losses from non-peak natural catastrophes exceeded $100 bn for the first time in 2025, according to Munich Re. Losses from events such as hailstorms reached $104 bn after several years of growth.
Catastrophe reinsurance capacity is becoming cheaper and more abundant, yet hundreds of billions of dollars in exposure still goes uninsured each year. The contrast shows how much capital sits behind the insurance market compared with the amount of protection businesses and households eventually buy.
Insurance covered less than half of global catastrophe losses in every year between 2015 and 2025, according to a new Moody’s analysis.
Across the full period, 57.8% of catastrophe losses remained uninsured, even as conditions in the reinsurance market became increasingly favorable for cedents.
Global reinsurer capital reached a record $785 bn at the end of 2025, around 10% higher than a year earlier, according to Aon estimates. Pricing softened again during the July 2026 renewals as growing capacity increased competition among reinsurers.
Digitalisation increases the speed of transmission
Financial transactions now take place almost instantly, and AI-supported decision-making could make market responses faster and more synchronised. At the same time, AI offers productivity and economic growth benefits, giving economies more resources to deal with other structural pressures.
According to Swiss Re Institute recent research, the advent of digital technology has paved the way for remarkable operational efficiencies within the insurance industry. However, the full extent of this digital revolution, similar to the productivity paradox seen in the global economy over the past two decades, is yet to be fully realized in insurance.
New Insurance Digitalization Index reflects this scenario, showing that no country’s insurance sector has fully tapped into the economic potential offered by digital technology. This suggests there is more growth and transformation to come.
Digitalization opens a new dimension to tackle the risks facing society. While the benefits of digitalisation are undeniable, it comes with its own risks that must be mitigated and insured against if these benefits are to be fully realised (see How Digital Transformation Accelerating the Insurers Growth?).
The roles of trust and governance can’t be overemphasised if digitalisation is to achieve its full potential in closing protection gaps and making society more resilient.
Systemic risk areas
| Risk area | Main exposure | How losses can spread |
| Financial system | Banks, markets, liquidity and public finances | Rapid transactions and correlated decisions can transmit financial stress |
| Digital ecosystem | Cloud providers, AI systems, data centres and technology platforms | Failure at a concentrated provider can disrupt many companies simultaneously |
| Natural hazards | Earthquakes, floods, storms and other catastrophes | Damage to infrastructure can interrupt supply chains and produce claims across several insurance lines |
| Socio-economic environment | Demographics, geopolitical tensions, public debt and productivity | Fiscal and political pressures can reduce governments’ ability to respond to major shocks |
Businesses are facing a permanent high-risk environment, as sharp rises in technology, geopolitical and regulatory threats create a more volatile operating environment and force tougher strategic choices, according to new research from Clyde & Co.
- 95% of organisations say they are confident in management’s ability to identify and mitigate material risks, suggesting many businesses are continuing to invest in preparedness even as the environment becomes harder to predict.
- 3% of business leaders say deglobalisation driven by geopolitical decisions is creating uncertainty that could materially affect growth over the next five years, while 60% expect conflict escalation and international instability to have a significant impact on their business in the next 12 months.
Connections can make the system more resilient when they genuinely spread risk. But common dependencies can turn those same connections into channels that amplify shocks.
Jean-Pierre Zigrand, Director of the Systemic Risk Centre and Associate Professor of Finance at LSE
The challenge is to preserve the benefits of being connected without concentrating risk in the same places.
The global specialty insurance landscape is entering a period defined less by isolated events and more by interconnected risk. Cyber incidents can trigger business interruptions. Natural catastrophes impact affordability while emerging technologies continue to reshape exposure faster than the industry can keep pace, according to Munich Re Specialty’s latest Global RiskScan 2026 survey, designed in partnership with the Insurance Information Institute (Triple-I), a trusted authority on insurance and risk trends.
Unlike traditional risk surveys that focus on a single audience or geography, this research assesses risk across the entire insurance value chain, from carriers and agents and brokers to middle market decision-makers (MM decision-makers), small-business owners (SBOs), and consumers.
Examples of concentration risk
| Exposure | Report finding | Potential consequence |
| Global cloud infrastructure | Three companies controlled 70% in 2024 | Disruption at one provider could affect many businesses at once |
| Taiwan semiconductor manufacturing | 88% of plants are in areas of extreme seismic risk | A major earthquake could affect technology supply chains across multiple markets |
| Critical infrastructure | Businesses increasingly depend on shared power, data and technology systems | One physical or digital failure could generate operational and insured losses across sectors |
| Public finances | High debt and ageing populations are putting pressure on fiscal capacity | Governments have less room to absorb losses after large shocks |
As AI and connected devices become embedded in every part of the economy, the distinction between digital and physical risk is fading. A single failure can trigger operational, financial, and safety consequences that can cause significant and costly disruptions to insureds.
As AI adoption accelerates, governance is struggling to keep pace, with 76% of organisations saying AI, data privacy and cybersecurity requirements are evolving rapidly, but only 68% have a mature AI governance framework in place.
This comes as 79% of leaders say AI and new technology will significantly influence their business over the next five years.
Preparing systems before another major shock
More connections do not automatically make an economic or financial system less stable, according to the report. The outcome depends on whether losses are concentrated at a small number of points or spread across a broader network, and whether institutions have enough financial and operational capacity to recover.
That requires businesses and governments to look beyond risks in isolation. They need to understand where dependence on infrastructure, suppliers, technology providers, financial institutions and other assets has become concentrated, then assess what happens if one of those nodes stops operating.
Scenario analysis and stress testing offer one way to expose such dependencies before an actual crisis. Companies also have the option of spreading their reliance across more suppliers and technology platforms rather than depending heavily on one provider.
Governments face a similar issue. Stronger fiscal buffers and pre-arranged risk financing give public authorities more room to respond after major losses, yet those buffers are already under pressure in many advanced economies.
High public debt, ageing populations and slower productivity growth are restricting government finances, while geopolitical fragmentation makes coordinated international responses harder.
The public and private sectors therefore have a shared interest in keeping mechanisms in place that distribute risk instead of allowing losses to remain concentrated where an event first occurs.
What interconnected risks mean for re/insurers
For insurers and reinsurers, stronger connections between risks make accumulation analysis more difficult. Exposures that appear unrelated on an individual policy basis might depend on the same cloud provider, power network, supply chain, financial institution or technology platform.
Re/insurers therefore need to assess common dependencies alongside individual insured risks. Scenario analysis, catastrophe models and stress testing help identify situations where one event produces losses across several sectors and lines of business at the same time.
Underwriting also gives the insurance industry a role before losses happen. Risk modelling, engineering analysis and pricing help identify concentrations and give insureds a financial reason to reduce exposure or invest in stronger protection.
What this means for insurers and reinsurers
| Area | Re/insurance response |
| Accumulation risk | Identify exposures connected through the same infrastructure, supplier or technology provider |
| Scenario analysis | Test how one event could produce losses across different sectors and insurance lines |
| Underwriting | Price concentrations and encourage insureds to reduce exposed dependencies |
| Risk engineering | Assess physical and operational weaknesses before losses occur |
| Reinsurance | Spread large exposures across companies, markets and geographies |
| Alternative capital | Use insurance-linked securities to add risk-bearing capacity |
| Public-private risk sharing | Address systemic exposures that exceed private-market capacity |
Risk transfer adds another layer of shock absorption. Reinsurance spreads exposures across companies, sectors and countries rather than leaving losses with the insurer or economy where they first arise. Insurance-linked securities provide another source of risk-bearing capital, while public-private arrangements address events whose potential losses exceed the capacity of private markets alone.
This becomes more significant as fiscal pressure limits how much governments are able to absorb after future disasters or financial shocks. Cross-border reinsurance and open capital markets allow risk to be distributed internationally and move capital toward areas where insurance protection is required.
For re/insurers, the issue isn’t eliminating economic connections. Modern financial, digital and commercial systems depend on them. The task is to identify where concentration creates weak points, understand how losses travel across those connections and maintain enough risk-bearing capacity to prevent one shock from producing much larger losses elsewhere.
FAQ
What is systemic risk?
Systemic risk is the possibility that a disruption in one part of an economic, financial or operational system spreads into other connected areas. The damage can become much larger than the original event when businesses depend on the same infrastructure, technology providers, suppliers or financial institutions.
What four systemic risk areas does the Swiss Re and LSE research identify?
The report groups systemic risk into four connected areas: the financial system, the digital ecosystem, natural hazards and the wider socio-economic environment.
Why is greater interconnectedness a concern?
Interconnected systems create more channels through which losses can spread. The report argues that the severity of a crisis can depend heavily on how the initial shock propagates and whether affected systems have enough capacity to absorb and distribute losses.
How much have corporate risk connections increased?
Swiss Re Institute analysed disclosures from 91 large US-based multinational companies and found the average number of connections between identified risks increased 24% since 2019.
Why are cloud infrastructure and semiconductor production considered systemic risks?
Both sectors are highly concentrated. Three companies controlled 70% of global cloud infrastructure in 2024, while 88% of Taiwan’s semiconductor plants are located in areas of extreme seismic risk. A disruption at one concentrated node could affect many companies and industries at the same time.
How can insurers and reinsurers respond to interconnected risks?
Re/insurers can examine common dependencies across portfolios, use scenario analysis and stress testing, improve accumulation modelling and price concentrated exposures. Reinsurance and insurance-linked securities also spread losses across a wider pool of capital.
Why does risk transfer matter for systemic resilience?
Risk transfer prevents large losses from remaining concentrated with one company, sector or government. Reinsurance distributes exposures internationally, while insurance-linked securities and public-private arrangements add further capital when losses exceed the capacity of individual insurers or public budgets.
