Mark Twain famously said ‘Twenty years from now, you will be more disappointed by the things that you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbour. Catch the trade winds in your sails. Explore. Dream. Discover’. In the current turmoil and uncertainty in West Asia, these lines assume great significance. In a panic-stricken scenario, when the safe harbours turn unsafe, one shouldn’t wait endlessly, dreaming of perfect conditions to initiate action; on the other hand, one has to take calculated risks, stepping out of the comfort zone and sailing to a different destination, battling new challenges. This may lead to a better solution. The key is to let go of inhibitions and embrace challenges and change.
In recent years, the contours and landscape of risk have changed dramatically. Catastrophe risk often hogged the headlines, but war risk has become monolithic. The ramifications of supply chain risk resulting from war or a pandemic are far more daunting. Tanker traffic through the Strait of Hormuz has come to a standstill, sending shockwaves throughout the world. It handles approximately one-fifth of total global oil and liquid natural gas shipments. The 33 km wide waterway is critical to world trade. Oil and gas prices are likely to go up even though the bulk of Iran’s oil exports go to China. The shutdown of Qatar’s LNG terminal, which constitutes about a fifth of global supply, as a result of an Iranian attack, has created panic worldwide. The Gen Z-initiated risk is another risk that risk managers cannot afford to be oblivious to. Sri Lanka, Bangladesh and Nepal have witnessed the devastation. But the risk arising from the radicalisation of religion and faith adds another layer to the continuum of risk. In addition, tariff risk poses a monumental shift in the way international trade operates. Political risk becomes more complex with every imminent war, imposition of unfair tariff rates, or volatile capital markets.
From a risk management perspective, over-reliance on imported oil and natural gas needs to be neutralised amid the looming threat of tariffs and war. India, for example, looks to scale up the share of EVs (Electric Vehicles). The promising sales target for EVs, such as 70% of commercial vehicles by 2030, can change the vehicle ecosystem in India – a leap towards climate risk reduction and less reliance on imported oil. But it calls for robust policy thinking, coupled with significant capital investment and adequate logistics along the freight corridors.
Dealing with Catastrophe Risks: Changing risk patterns call for a calibrated approach.
There has been a noticeable shift in the gamut of catastrophe risks over time. Remember the not-too-distant past, when catastrophes were characterised by low-frequency, high-severity events; today, they exhibit linear progression, becoming systemic, interrelated, and recurrent. The alarming rise in non–peak perils due to climate change has led to higher-frequency, higher-severity risks.
A quick look at catastrophe losses shows a clear changing trend. Natural disasters accounted for global losses of about US$224 billion in 2025- the insured losses totalled US$108 billion. In 2024, inflation-adjusted total losses were even higher at US$368 billion, with insured losses of US$147 billion.
Climate-related disasters accounted for 92% of all losses in 2025 and 97% of insured losses. Around 17,200 people lost their lives in natural disasters worldwide, which is much higher than the 11,000 deaths in the previous year, though still below the 10-year average of 17,800 and the 30-year average of 41,900. (Source: Munich Re)
An important emerging trend is the growing impact of secondary perils such as floods, severe convective storms, and wildfires. These accounted for most of the losses in 2025, These losses, individually, may not be severe, but collectively they cause significant economic and insured losses. The cascading effects of these high-frequency losses and somewhat severe losses make them systematic.
Catastrophe risk has moved away from the conformist, foreseeable risks it used to entail.
Weird climate change, unwieldy urban concentration, recurring cyber failures and frauds, pandemics, financial collapses, and geopolitical shocks have shattered historical loss assumptions based on predictive analysis, which uses historical data to forecast future behaviour. The data converts historical data into actionable insights and develops probable future scenarios. The nature and scope of catastrophes have changed over the period – it is not the size of the risk that has changed the risk landscape, but, more importantly, the qualitative and quantitative dimensions of catastrophes, which are of concern. The predictions have gone wobbly amid changes, such as risk factors. Catastrophe risk has moved away from the conformist, foreseeable risks it used to be in the past. Moreover, the inadequate historical data for rare and unpredictable events, and changing past patterns resulting from climate vagaries, data quality, and standardisation issues, pose challenges for using data to assess catastrophic risks.
Woes of the Capital Market
The capital market suffers from mood swings or a downturn in sentiment, leading to panic. Risk Managers need to engage with customers proactively or constructively to help sustain trust. SIPs that help create wealth for millions are in dire straits and need proactive messaging: continue with your patience; persistence pays in the long run, supported by empirical evidence.
Authored by:
Dr Abhijit K. Chattoraj
