The insurance sector is undergoing a transformation. In a context marked by the climate crisis, cybersecurity, and new technologies, companies have ceased to be mere policy sellers and have become global risk managers. Experts agree that traditional approaches—based on statistical prediction and claims stability—are no longer sufficient to address a changing reality, with increasingly frequent extreme events and constantly evolving digital threats.
The impact of climate change
"The insurance sector has been one of the first to feel the negative impacts of climate change," says Lluís Bermúdez, professor of financial economics and insurance at the University of Barcelona and an expert in risk models for the insurance sector. According to UNESPA, in 2023, private insurers paid €847 million for more than 993,000 claims resulting from meteorological phenomena such as floods, storms, and hail. These situations, which are no longer exceptional but recurring, have forced companies to review and adapt their risk calculation models.
"The reinsurance industry has had to restructure its pricing and underwriting policies to offset losses resulting from the increase in claims associated with climate change," explains Bermúdez. Despite this scenario, Spain has a mechanism that distinguishes it from other countries: the Insurance Compensation Consortium, a public body that assumes the costs arising from extraordinary natural disasters such as the Valencia disaster or theAlice just a few days ago. "This collective savings coverage, complementary to reinsurance, puts us in a more favorable position than other European countries, which are now considering adopting our model," the professor adds.
From her perspective, Maria Mercè Claramunt, also a professor and expert in actuarial modeling and risk management in the insurance sector, points out that the climate challenge has also reached regulation. "European supervisors—such as EIOPA—have been urging insurers for years to integrate climate risks into their internal management models," she explains. The Solvency II regulation requires entities to set aside more capital to deal with natural disasters, a requirement that, according to Claramunt, "is translating into increased premiums for policyholders."
Climate change does not affect all types of insurance equally. Agricultural insurance—such as that covering hail or drought—is among the most exposed, but so is home and property insurance in coastal or flood-prone areas, and even life and health insurance, since "heat waves and the spread of infectious diseases have a direct impact on the sector," Claramunt points out.
Cybersecurity and digitalization
The other major challenge is invisible but omnipresent: cyberattacks. "Cyber risks are constantly evolving, making it very difficult to quantify them with the level of confidence the industry requires," warns the professor. Insurers, by nature, need to predict and assign probabilities. But in the digital world, technological chance is unpredictable. "The nature of risk is highly variable, which makes it only partially insurable and requires resorting to other management mechanisms, such as prevention," he explains.
Insurers, moreover, are not only the ones who cover these claims, but are also potential victims. As Claramunt points out, "companies work with large volumes of data and are very sensitive to potential attacks." In 2023, the European Union approved the DORA (Digital Operational Resilience Act) regulation, which has been in force since January of this year. This regulation requires all financial institutions—including insurers—to strengthen their IT security and ensure operational continuity in the event of an attack.
However, this digitalization not only poses risks, but also opportunities. "The insurance sector has always worked with data to calculate premiums; now the difference is the speed and volume with which it must be analyzed to improve processes and make strategic decisions," says Bermúdez. The incorporation of artificial intelligence and big data It can allow for better pricing and fraud detection, but it also poses organizational challenges and ethical and privacy dilemmas.
Towards a new risk management model
Given this scenario, experts agree that the future requires a paradigm shift: "Insurance will no longer be limited to simply compensating for losses, but will also be able to incorporate other risk management solutions, such as prevention." "When faced with a risk, we can mitigate it, save to address the losses, or insure it," Bermúdez adds. "Currently, some insurers already include an alarm system alongside home insurance."
Added to this are other structural challenges, such as an aging population, which is putting pressure on life and health insurance, and growing competition within a sector that, according to Bermúdez, "has been operating with very tight margins for decades."
According to the professor, continued innovation is key: "The insurance sector must continue developing its capacity to understand and anticipate risks in an increasingly uncertain world."
Ethical insurance, an alternative within the sector
At a time when many economic sectors are reviewing their social and environmental commitments, the insurance world is also beginning to incorporate ethical and solidarity criteria. Behind policies and premiums lies a constant flow of money, often with no known where it ends up being invested. In this context, the idea of ethical insurance was born, an alternative that combines financial protection and social impact.
This model proposes management based on transparency, social responsibility, and sustainability. The goal is for the insurance system to cease being a mere financial compensation mechanism and become a transformative tool serving people and the planet. Furthermore, this approach aligns with the criteria of ethical finance, which rejects investment in speculative or harmful activities—such as gambling or the arms industry—and transparently allocates resources to projects with a positive social or environmental impact.
Arco Cooperativa is a prominent example. Founded in the 1980s, this brokerage firm embraces the social and solidarity economy and advocates for "an economic system that puts people, the planet, and society at the center," as Albert Castillo, a member of the cooperative, explains.
The profile of its customers is varied, but they share one common element: a desire to consume wisely. They rely on families and individuals, but also popular culture organizations, leisure associations, AFAs, and cooperatives seeking consistency between their values and the services they purchase.
When asked about the widespread price increases, Castillo points out that education is key to maintaining trust: "When there are changes in premiums, we always try to explain the reasons and we do so in advance. Transparency is the foundation of our relationship with our customers."
To ensure these best practices, an independent body—the Ethical Finance Observatory—audits entities annually and awards the EthSI seal to those that meet transparency and social responsibility criteria. Arco Cooperativa has this seal and works to ensure that all the companies it collaborates with progressively adopt these criteria.
Castillo sums it up with a clear idea: "Just as people are very careful about where they deposit their savings, they should also know where their insurance money goes. With us, they know that their management will be ethical and supportive."