For the first time in its 14-year history, the Insurance Banana Skins report, published biennially by PwC and the Centre for the Study of Financial Innovation (part of the London Foundation for Banking and Finance), reveals that technology-related risks now dominate the top three concerns facing the global insurance industry.
Based on insights from hundreds of insurance professionals worldwide, the survey highlights the extent to which technology-related risks have become embedded, with cyber-crime, artificial intelligence (AI), and technological change identified as the most urgent threats over the next two to three years.
Author Keyur Patel summarises the results:
Cyber crime
- Cyber crime tops the list of risks in this year’s Insurance Banana Skins survey for the third consecutive edition – receiving one of the highest severity scores we’ve ever seen in this survey
- There’s a broad consensus that insurers are a constant target for attacks, private and state-sponsored – and it’s a question of “when”, not “if”, successful breaches occur, with potentially devastating consequences, material and reputational.
- Cyber crime was seen as one of the greatest threats in every sector and region we looked at. It has not ranked lower than number two in our survey for more than a decade.
- AI – including Generative AI capabilities – and ‘ransomware-as-a-service’ are lowering the barrier to entry for cybercriminals while amplifying the damage they can do.
- A respondent in Canada said: “Criminals are always one step ahead, and they attack an organization’s weakest link – which makes a cyber-attack impacting most companies just a matter of time”.
AI
- The “headline behind the headline”: artificial intelligence is the second highest scored risk in this year’s Insurance Banana Skins survey – and in many ways, the most pervasive.
- The potential for misuse or poor governance of Generative AI is seen as a very serious threat to the industry in its own right. But AI is an amplifier of many of the other leading risks, including cyber crime.
- The AI question is not just about which technologies firms adopt (or don’t), but the wider challenge about how the industry approaches regulation, develops human talent, stays relevant to its customers’ expectations, and ensures its business models are fit for purpose.
- A respondent in Brazil warned that: “The speed of adoption, especially of generative AI, is outpacing internal controls in many firms – from biased or opaque decision making to exposure to deepfake-driven fraud. Clear governance, traceability, and ethical use frameworks are urgently needed.”
- AI is ultimately a double-edged sword, and any accounting of risk versus opportunity needs to include the risk of not using AI when, for example, cybercriminals embrace its offensive capabilities.
Technology
- While AI and other technologies are rapidly evolving, there’s a real concern that the insurance industry is being hampered by legacy IT systems – which drove technology risk up to No. 3 in our survey.
- Outdated systems inhibit integration of new technologies, delay innovation, and increase operational inefficiencies.
- A respondent in the UK said a main risk facing the industry is that: “Insurers fail to wholeheartedly embrace what are now clearly major shifts and opportunity in technology. Legacy tech and mindset prevail, and the industry continues to lose money through frictional costs and inefficiency”.
- Tech systems are in urgent need of modernisation, but this is likely to be both costly and fraught with uncertainty. As a respondent in the Netherlands put it, “Changes are going so fast, a best practice today may not be relevant tomorrow.”
Macroeconomy
- As the number four rated risk in Insurance Banana Skins 2025, Macroeconomic risk comes in at its highest position in a decade.
- The unpredictability of the global economic environment is seen to be undermining planning, investment, and growth.
- A respondent in New Zealand said that “the threat to international free trade has rendered economic uncertainty a significant factor”.
- The core of the insurance proposition hinges on the question of whether customers can afford insurance. A respondent in Australia said: “The affordability issue is not going to abate, and that is going to result in ongoing calls for greater regulatory oversight and scrutiny over coming years.”
Climate Change
- Climate change comes in at No. 5 in our overall rankings, but is the No. 2 risk for P&C insurers and top of the list by a long way for reinsurers – now very much seen as an immediate risk as well as a longer term one.
- In Brazil, a respondent said that the industry had until recently underestimated the impact of climate change – but a recent wave of floods in the south of the country led to significant catastrophic losses, prompting many insurers to “reflect on this new reality and change their operational strategies”.
- Traditional risk models are struggling to keep up. Climate change is making risks more unpredictable and harder to quantify – especially unexpected or secondary events that current models don’t capture well.
- A respondent in in Poland warned that: “[Prevailing] models could be proven very wrong sooner than we think”.
- There’s a growing unease that many climate-related risks might become impossible to insure – which raises fundamental questions about the purpose of insurance.
Notable results outside the top 5
- Outside the top five on our rankings, we also received some striking insights
- At No. 6, regulatory change is more of a concern than suitability of regulation (No. 10), reflecting a view that many regulatory bodies around the world are not keeping pace with fast-changing market developments, including AI, or could inadvertently stifle genuine innovation.
- At No. 7, the risk that insurers will have difficulty attracting and retaining human talent is judged to have dropped but is still relatively high up the table. A respondent from Cananda observed: “I actually see more qualified people being drawn into this field… “But I think that sometimes the industry doesn’t know how to apply their skills well or keep them interested.”
- The accelerating pace of change in the industry has lifted change management to No. 8 in our rankings – but while change management could be a huge problem for individual firms that do it poorly, it is an opportunity that more adaptable players can seize.
- This year’s survey saw political risk climb to No. 9, which was closely linked to the fastest rising Banana Skin this year, barriers to trade (up six positions to No. 13). A respondent in Australia noted that: “It’s Difficult to see through the US Tariff ‘noise’ as to actual underlying risks”.
In summary
- The responses we received in Insurance Banana Skins 2025 show that the environment in which the industry operates is changing faster than it ever has before.
- Insurers will need to challenge some fundamental assumptions – about their vulnerability to attacks, about the immediacy of climate risks, about what the future of insurance looks like in a world increasingly defined by AI.
- Firms need to ask foundational questions. How do they stay relevant to customers? Are current business models fit for purpose?
- There was a sense, ultimately, that when risks are known, the industry is often well prepared – but the looming unknows could ultimately define its future.
Read the full report below: