In the second of two articles Matt Lane, Chief Solutions Officer at Davies charts the course for the insurance industry as it looks to future risks.

In Part 1, we explored historical patterns of disruption and the lessons they offer for today’s shifting insurance landscape. As we turn to the present, those same dynamics—ambition, fragmentation, overconfidence—continue to shape how emerging risks and technologies unfold. In this section, we’ll also revisit one final cautionary tale from the past to illuminate a key challenge of the future: the danger of innovation divorced from commercial reality.

The rise of risk in the digital age

Emerging risks are multiplying. AI and machine learning are driving efficiency, but also raise concerns about transparency, bias, and regulatory oversight. Cyber risk continues to evolve, with potential for systemic loss events. Climate modelling is growing in sophistication, but variability in inputs and outputs still clouds decision-making. Add to this the pressure for ESG compliance, and insurers are facing challenges far more complex than even a decade ago.

These risks are not hypothetical—they’re operational. Data integrity issues in AI-led underwriting could expose carriers to regulatory penalties. A cyber attack on a key supplier could trigger a cascade of claims across unrelated portfolios. Understanding how these risks manifest in real-world systems—and how technology either mitigates or magnifies them—is now core to the insurance mission.

In this context, fragmented or non-standardised digital infrastructure becomes more than a nuisance—it becomes a vulnerability. Without coordinated systems, underwriters face inconsistent data inputs, exposure modellers lack interoperability, and risk accumulations become harder to track.

The technocracy fallacy

History reminds us that not all innovation succeeds—however brilliant. Isambard Kingdom Brunel’s S.S. Great Eastern was an engineering marvel, but commercially unsustainable. It bankrupted its backers and was retired within four years.

Today’s equivalent might be large-scale AI deployments that lack clear ROI or governance. Without commercial alignment, even visionary projects can falter. For insurers, that means investing in digital initiatives that integrate with underwriting logic, compliance requirements, and long-term capital planning.

Innovation without economic discipline is a recipe for inefficiency. The most exciting tools still need to answer the question: how does this improve our ability to measure, manage, and price risk?

Making emerging risk tangible

Insurance professionals aren’t just facing abstract threats—they’re dealing with practical challenges: how to structure cyber covers in an era of state-sponsored attacks, how to ensure climate models stay accurate under rapidly changing conditions, how to manage AI-driven decisions without exposing the business to new liability risks.

Each of these domains demands better data, clearer frameworks, and smarter coordination across the market. What’s missing isn’t technology—it’s integration and alignment. As a result, digital innovation should be paired with emerging risk governance: clear policies, shared standards, and proactive regulatory engagement.

This is where insurance has a unique opportunity—to shape the rules, rather than just respond to them. With regulators paying close attention to AI ethics, ESG disclosures, and systemic risk, industry leadership on standards could become a differentiator.

Implications for insurance professionals

For underwriters, brokers, and risk managers, the message is clear: digital innovation must be embedded with clear links to operational impact. Fragmented systems increase friction, obscure risk visibility, and compromise pricing accuracy. Without interoperability, even the best tools fail to deliver consistent results.

As regulators begin to weigh in—whether via AI accountability laws, ESG mandates, or evolving cyber standards—insurers must be proactive. Coordinated data and risk governance strategies are no longer optional.

That includes rethinking how delegated authority frameworks handle AI-based decisions, how board-level governance addresses tech investment risk, and how compliance teams map new liability flows.

Final thought: innovation with guardrails

Innovation will shape the future of insurance—but it needs frameworks that enable resilience, transparency, and scalability. The past shows us the risks of unchecked experimentation and misaligned ambition. The present demands we apply that learning with intent.

As insurance professionals, we don’t need to fear disruption—but we do need to steer it. The future belongs to those who build with foresight, not just speed.

And if the past is any guide, the winners will be those who combine boldness with discipline, creativity with coordination—and build not just for today’s market, but for tomorrow’s.

Originally posted in Emerging Risks.

If you would like to continue the conversation, get in touch with Chief Solutions Officer, Matt Lane at matt.lane@davies-group.com