The insurance industry comprises companies that provide risk management by underwriting the risks of individual entities and pooling them to spread the risk. An insurance contract guarantees that, on the occurrence of a specified uncertain future event, the insurer provides a payment to the insured, and thereby assumes the risk. In return, the insured (or policyholder) pays a premium, or a regular fee, to the insurer for providing the coverage. Insurance is critical in providing financial security to people and organisations performing their daily activities and operations; or undertaking new and risky ventures.
In addition to offering traditional coverages for known risks, supported by comprehensive industry experience and understanding of their occurrence, insurers must also continually adapt to emerging and uncertain risks. Today, such risks are manifesting at an unprecedented rate as the world is challenged by growing complexityand interconnectedness between systems. To fulfill the consequent demand for insurance coverage against emerging risks, insurers must first evaluate such uncertainty and ensure they can withstand potential losses and operate sustainably. The insurance industry shares key financial and operational risk exposures with the wider financial sector, but is also uniquely exposed to insurance risk, so internal assessments of risk must account for the complexity of interactions between both an insurer’s assets (premiums invested to coverliabilities) and liabilities.