Office Hours: Emerging Risks & Trending Losses

Rising Threats in Insurance

The insurance sector, particularly for financial institutions like credit unions, confronts a sharpening array of emerging risks as 2026 begins. Losses from natural catastrophes remained extraordinarily high in 2025 despite no major U.S. hurricane landfalls, with California's wildfires alone costing an estimated $40 billion and severe convective storms adding another $50 billion in insured damages. These non-peak perils have established a new baseline, contributing to global insured losses surpassing $100 billion annually for six consecutive years and straining underwriting profitability.

Cyber threats dominate the risk hierarchy. For the fifth consecutive year, cyber incidents rank as the foremost concern in global surveys, with a record margin over other perils including artificial intelligence. Ransomware continues to drive the majority of large cyber insurance claims, while emerging vectors like deepfake-enabled fraud and supply-chain compromises amplify systemic exposure. The cyber insurance market, now valued around $16 billion, shows signs of tightening after a period of softening, as loss frequency and severity rise.

Broader pressures compound these challenges. Geopolitical tensions and potential tariffs inflate claims costs through supply-chain disruptions and higher import prices for repair parts and materials. Social inflation fuels escalating litigation in employment practices and liability lines, with nuclear verdicts rising sharply in recent years. For credit unions and similar entities, trending losses stem from sophisticated scams, check and loan fraud resurgence, and evolving cyber tactics exploiting generative AI.

Tensions arise in balancing proactive mitigation against competitive pressures. Insurers grapple with deteriorating combined ratios—projected to worsen from 97.2% in 2024 to 99% in 2026—while buyers seek affordable coverage amid hardening scrutiny on controls. Non-obvious angles include the convergence of climate and cyber risks, where extreme weather disrupts critical infrastructure and heightens digital vulnerabilities, and the lag in policy language for novel exposures like AI-driven decisions.