Emerging Risks in 2025 Identified by Australian Actuaries

From climate volatility to quantum computing threats, the actuarial profession faces an evolving risk landscape.

In late 2024, the Institute surveyed members to identify emerging risks across practice areas, with strong responses from those in general insurance, life insurance and risk management. Respondents identified both mainstream and 'left-field' concerns.

In this article, we identify top mainstream risks, how the Institute is responding and share resources to further strengthen your knowledge on these emerging risks. A second subsequent article will discuss the findings on left-field risks.

Key emerging risks

1. AI and technological disruption

Technological disruption, particularly artificial intelligence, leads the list of risks for actuaries.

Comments from survey respondents highlighted both opportunities and challenges, with AI described as having a mixed impact across several actuarial domains.

Members expressed concerns about 'managing hype and misinformation about the latest buzzwords and technologies' while also recognising AI's transformative potential in product development and pricing. Some respondents specifically noted the risk of cybercrime associated with AI and the potential to enable criminals to 'cheat the system'.

AI represents both a significant challenge and opportunity for actuaries to demonstrate their value in an evolving landscape. The Institute's paper The AI-Powered Actuary: Amplifying Our Value looks at how AI and advanced data science are reshaping industries and uncovers how actuaries can add value as strategic visionaries and outlines plans to ensure actuaries thrive in an AI-driven world.

Members can also catch up on this topic by reviewing relevant past Insight Sessions .

2. Economic and financial pressures

Economic and financial risks featured prominently in the survey results, with inflation, pricing cycles and affordability concerns highlighted across practice areas.

Members noted cost control and inflation as significant concerns. In insurance markets, respondents specifically identified 'reduced profitability' and challenges in maintaining risk-based pricing while addressing affordability concerns. Some members expressed concerns about the potential for regulatory intervention where insurer pricing strategies are seen as unfair.

Balancing innovation with ethical considerations and professional standards is a foundation of actuarial work. Complying with the Institute's Code of Conduct ensures that members act in the public interest to build and promote confidence in the services provided by actuaries.

A further reading recommendaiton on the issue of fairness is the Dialogue Paper, Fairness in Insurance: A Challenge to Boards of Insurance Companies. Useful sources of reading to stay in touch with evolving economic and financial risks include the Reserve Bank of Australia's quarterly Statement on Monetary Policy and semi-annual Financial Stability Review .

3. Cyber security threats

Beyond specific cybercrime associated with the expanding use of AI, cyber risk emerged as the third most significant concern for survey respondents who characterised cyber security as a downside risk that is increasing and 'expensive to manage'.

General insurance actuaries highlighted challenges related to 'cyber risk for an insurer and cyber insurance provided by the insurer' meaning that actuaries have a role to play in both the operational and product-development dimensions to combat cyber risk. The rapidly evolving nature of cyber threats and the limited historical data available make this a particular challenge for actuarial modelling and risk assessment.

The Australian Reinsurance Pool Corporation has provided a wide-ranging discussion in its Cyber Terrorism in Australia: 2024 Update Paper .

In the 2024 Institute Dialogue Paper Cyber Protection Gap Widens for SMEs , 2025 Actuaries Institute President Win-Li Toh, and co-authors Dr Michael Neary and Sarah Wood, identify a widening protection gap for SMEs and suggest that insurance is a crucial component of cyber risk management for many of Australia's small business.

4. Regulatory and political uncertainty

Regulatory change and political risk featured fourth. Concerns included 'regulatory unpredictability - downside' and an 'increasing regulation burden'.

Some members observed the risk of 'regulatory intervention - if price increases continue at an industry level,' suggesting a connection between market dynamics and potential policy responses. Others noted political risks related to 'changes in government, federal vs. state government tension' and broader 'geopolitical risks - increasing.'

Since the survey, there has been further global political instability, especially with high and rising global trade barriers, and the Federal election on 3 May 2025.

We encourage members to remain up to date with regulatory announcements including speeches from ASIC and APRA Executives highlighting regulatory priorities and emerging risks. The Institute also contributes to regulatory developments, such as making a cross-function response to APRA's recent Discussion Paper on proposed changes to the governance of regulated entities. 

5. Climate change challenges

Climate risk was consistently identified as a growing concern with primarily downside consequences. Respondents described climate change as 'mixed, mainly downside' and 'increasing' in importance.

The challenge of modelling climate impacts on insurance risk, investment portfolios and long-term liabilities is becoming increasingly important across practice areas. Climate change was also mentioned in the context of 'transition risk,' acknowledging the financial and operational challenges associated with adapting to a lower-carbon economy.

For further reading, members can refer to Climate Change - Technical Paper for Appointed Actuaries which provides an outline of how insurance operations may be impacted by climate change and offers suggestions to address these in a Financial Condition Report. The information contained in the Technical Paper (TP) may also be helpful in many other situations when advice on climate risk is provided to financial institutions.

The Climate and Sustainability Practice Committee has also recently updated the Institute's Climate Change Public Policy Statement in March 2025, recognising that the world's climate is warming at the fastest rate in modern history and that greenhouse gas emissions from human activity are the main cause of warming. The Statement outlines nine policy positions to respond to climate change.

External risk comparisons

When comparing our survey results with external risk forecasts for 2025, we find significant alignment with several major reports including:

1. World Economic Forum (WEF) Global Risks Report 2025: Our findings on AI, climate change and cyber security mirror the WEF's top long-term risk concerns.
2. APRA's Strategic Focus Areas 2025: The regulator's priorities around operational resilience, cyber security, and climate-related financial risks strongly reflect the concerns identified in our member survey.

Consulting firms, large insurers and reinsurers, media and other organisations publish 'emerging risks lists' at the start of the year. While many of these lists align with those risks uncovered in the Institute's survey of its membership, it is also important to consider the specific risks unfolding for each of the practice areas and the 'left-field' risks that may occur.