As always, entering the last months of the year we are trying to foresee what is expecting us once the frontier between the years will be crossed. According to the latest AM Best research, "in the year ahead, insurers see plenty of challenges, including cyberrisk, growing catastrophe losses and lingering impacts of COVID-19. But, surprisingly, not all is gloomy."

The key points identified by AM Best analysts by putting together opinions collected across the industry are:

• Escalating Risks: The industry says it's better prepared to face the escalating risks-particularly in property and casualty-that will likely continue to challenge it next year.
• Dealing With Risk: "Dealing with risk" has become the operative phrase for insurers as the costs and impacts of cyberattacks and natural catastrophes reach new heights.
• Rising Costs: A deep winter freeze, hailstorms and wildfires contributed to insured natural catastrophe losses of USD 40 billion in the first half of 2021, according to the Swiss Re Institute. That figure is above the previous 10-year average of USD 33 billion and the second highest on record for a first half after 2011.

Overall, even if the risk landscape will be still challenging in 2022, insurers and analysts believe the industry is better prepared to face the escalating risks-particularly in property and casualty. AM Best analysts said the industry overall is "well capitalized" to support these challenges, although some market segments may face a new-normal level of pressures.

At least in two directions, the cyber risks and the natural catastrophes, which both have reached a peak in 2021, insurers are looking to 2022 trusting that they will be able to capitalize on technology and public-private partnerships in order to mitigate risks and improve resilience.

AM Best quotes also the opinions of top reinsurance professionals believing that at least in what motor insurance and housing insurance are concerned, it is highly probable seeing a hike in the insurance rates in 2022, both direct insurers and reinsurers needing to better adequate prices to the increasing risk levels. While in 2020, both motor insurers and home insurers did their best to maintain prices affordable, given the volatile financial situation of their customers, time has come - many believe-, to return to a more risk adapted pricing.

Finally, while the Covid-related issues seem to settle, cyberattacks are an ever-growing threat. "Since May 1, there have been at least 53 "significant" international cyber incidents, including the Colonial Pipeline attack that impacted the oil industry and caused a spike in gas prices, according to the Center for Strategic and International Studies. In all of 2015, there were 35 incidents, according to the report," AM Best's analysis says. The increasing frequency is challenging for sure, but maybe a bigger difficulty for the industry is the enormous diversity and the fast-changing nature of the cyber incidents. The industry needs to adjust its response and products at a pace that can keep track with the true threats, which is altogether highly challenging. Another challenge is "ensuring clarity up front, before large-scale loss events, as to what is covered and by whom," meaning among other using a simple and clear language, so that insureds can understand well what is and what is not covered, AM Best quoted the opinion of Caribou Honig, chairman and co-founder of InsureTech Connect and a partner at SemperVirens Venture Capital.

The full version of the AM Best analysis is available here.