As part of the 29th International Global Risks Seminar, Javier Santiso, CEO and General Partner of Mundi Ventures, offered a broad perspective on how technology is revolutionizing the insurance sector and what challenges are on the horizon.
Throughout history, we have faced many revolutions, but the current changes are radically different. Technological speed drives unprecedented transformations, promoting a global and interconnected impact. So far, technological advances, such as fire or the combustion engine, replaced one technology with another. Today, however, humans are the “replaced” asset, Santiso said during his speech.
These innovations open up new opportunities in various industries, improving quality of life and facilitating access to information and services. Digitalization and Artificial Intelligence are redefining entire industries, ushering in an era of accelerated progress and significant change that will shape the future of humanity.
Technology is moving fast, while social and organizational engineering are moving slower, creating challenges and opportunities. In the insurance industry, considered a “metaindustry” due to its relationship with multiple industries, banks, retailers and telcos are increasing in prominence. “Everyone cares about insurance,” the CEO of Mundi Ventures said. Companies like Booking and Tesla generate a large portion of their revenue in this area. Ikea and Apple also invest in these types of products, while telcos seek to expand their offering in cybersecurity and AI.
Challenges seen as opportunities
Javier Santiso identified the challenges that are most likely to impact the economy. In this context, he highlights that adaptability and innovation will be key to mitigate associated risks and seize potential opportunities.
1. Demographic Changes
Demographic dynamics vary by region, but an aging population seems to be a global trend. This poses challenges and opportunities such as longevity and insurance coverage for different demographic groups.
In Europe, for example, demographic dynamics are very different from those in Latin America. Santiso warned that “Europe is becoming the periphery,” with the epicenter of population growth in Asia and Africa. He emphasized that “for the first time, there are more seniors than children under five,” which is relevant to longevity-focused businesses. The expert mentioned Silicon Valley’s obsession with “killing death,” and how technologies like Elon Musk’s Neuralink are looking to extend biological life. In this context, insurance plays a crucial role in promoting healthy longevity.
In Latin America, on the other hand, there are great opportunities to improve insurance penetration, which could reduce inequality. In Santiso’s words, “the insurance lever is key to lowering Gini ratios,” stating as an example the investment in Insurtechs like Sami Health in Brazil to address these challenges.
2. Climate Risk
Climate risk is both a risk factor and an opportunity. “We’re not doing well at all” the Mundi Ventures CEO said of last year’s record loss ratios that are expected to continue to rise. The impact of climate change is severe: at 1.5 degrees of warming, the loss of 6% of species is expected; at 2 degrees, deteriorated habitat populations will increase ten-fold. Demographic shocks will be inevitable, with populations moving from country to country.
In his view, these imbalances have huge implications, and Mundi Ventures is working on a $1 billion Climate Tech fund, which supports the large capital investments the technology industry requires before launching its products to market. For Santiso, while “it is expensive and risky,” the opportunity is also massive. He anticipates that we are heading toward a wall and the imbalance is increasing. Climate change losses increase across all metrics, reaching huge trillion-dollar figures. Sooner or later, “legislators are going to panic.” When this occurs, they will use tax and regulatory levers to act quickly, the expert anticipates.
On the other hand, the need to adapt buildings and properties to the impacts of climate change poses challenges for the real estate industry and, therefore, for the insurance market. Technology is also being used to prevent and mitigate risks in this industry.
“Nearly no building is prepared,” and new projects are also not taking this into account, which has generated an urgent response to adjust to regulations, causing overruns, he pointed out. However, he noted that there are also opportunities for the insurance industry, which need to be detected early and seriously to get ahead of this mega trend.
3. Technological
The time factor is also considered essential by the General Manager of Mundi Ventures when it comes to regulation and its impact on emerging businesses. “Regulators are going to start reviewing businesses that are beginning to become saturated with problems,” such as Airbnb, Uber and Deliveroo, which generate complications surrounding gentrification, as well as other collateral damage, he explained. “When these businesses grow and problems escalate, the growth curve breaks,” which can be devastating for seemingly viable businesses, Santiso warned.
Rapid technological evolution, including Artificial Intelligence, cybersecurity and machine-to-machine connectivity, presents challenges in terms of insuring these new risks. However, it also opens opportunities for the development of innovative insurance products and the creation of solutions to mitigate such risks. In this context, the risks are real and increasing. It is vital to have a long-term vision and seriously consider these risks when investing in new technologies and business models. As an industry, it is important to be prepared and anticipate such potential regulatory waves to minimize their impact and take advantage of opportunities that arise.
Javier Santiso
CEO and General Partner of Mundi Ventures
