Technology Related Risks to Insurance Industry Reach Historic Highs: PwC & LFBF

For the first time in its 14-year history, the Insurance Banana Skins report, published biennially by PwC and the Centre for the Study of Financial Innovation (part of the London Foundation for Banking and Finance), reveals that technology-related risks now dominate the top three concerns facing the global insurance industry.

Based on insights from hundreds of insurance professionals worldwide, the survey highlights the extent to which technology-related risks have become embedded, with cyber-crime, artificial intelligence (AI), and technological change identified as the most urgent threats over the next two to three years.

Cyber-crime retains its position as the number one risk for the third consecutive edition, and its severity score reached an all-time high, driven by the increasing frequency and sophistication of attacks, the proliferation of ransomware-as-a-service, and amplified anxiety towards the disruptive potential of generative AI in the wrong hands.

The misuse or poor governance of AI has surged in prominence, becoming the fastest-rising risk in the survey. Industry concerns centre on the potential for AI-driven fraud, as well as the risk of regulatory breaches due to inadequate internal controls. While AI clearly presents transformative opportunities for the insurance industry, the report warns that failing to harness its potential could itself become a critical risk.

The third-ranked risk—failing to keep pace with technological change—reflects long-standing challenges around legacy IT systems and the cost of modernisation. Companies know they are losing money through inefficiencies but are hesitating to commit to updates that may soon be outdated. Because of this, some in the industry see this ‘banana skin’ as less of a risk to the industry, and more one for individual firms – moving forward in this space is a competitive differentiator, at the expense of those slow to adapt.

Andy Moore, Lloyd’s and London Market Insurance Leader, PwC UK said:

“The world is changing fast, and many risks feel more immediate and tangible than they have in years.

“The most pervasive risk identified this year is the impact of artificial intelligence, rising quickly up our rankings. Insurers are in uncharted territory with AI. On one hand, the valuable data insurers hold makes them highly attractive to cyber criminals. On the other, the sector is well-positioned to navigate emerging risks and adapt to new threats—something it has done throughout its history; it’s what it was built to do.

“Closely linked is the acknowledgement that cyber-attacks are now a constant global challenge. Insurers have told us it is the top issue keeping them awake at night, buoyed by generative AI lowering the bar to entry for cybercriminals. Although cyber-crime has been the top risk for a few years now, we’re seeing insurers pivot from prevention to resilience, learning from the support they give their clients in other sectors.

“The ability of the insurance industry to adapt to change is a top ten risk in our survey, but it’s also the key to overcoming many of the challenges we face. In a world where change is constant and planning ahead is increasingly difficult, insurers who build the right teams, harness smart data, and act decisively won’t just keep up—they’ll lead the way.”

Economic and Regulatory Pressures Intensify

This year’s survey shows a sharp rise in concern over macroeconomic risks, now perceived as the most severe in a decade. Lingering inflation, uncertain interest rate trajectories, and geopolitical instability are creating a challenging environment for insurers, undermining strategic planning and growth.

Survey respondents drilled down further to a possible root of the risk – the affordability of insurance. The reputational threat to insurers, and the threat to the industry’s ability to pool risk effectively, when poor macroeconomic conditions put pressure on affordability of products, raised concerns for survey respondents.

Regulatory risk also features prominently, with industry professionals voicing frustration over the misalignment between regulatory priorities and the fast-evolving risk landscape. The most pressing concern is that regulators are not keeping pace with emerging threats—particularly those driven by technological change. Additionally, questions around the relevance and implementation quality of existing rules persist, with calls for more agile, forward-looking governance that supports innovation while safeguarding market integrity.

Harry Weber-Brown, Director of Partnerships, LFBF, said:

“This is the tenth survey of risks facing the global insurance sector conducted by the Centre for the Study of Financial Innovation (CSFI) and is the first since the CSFI became part of The London Foundation of Banking & Finance.

“What is striking is that cyber-crime remains the industry’s leading risk, once again topping the rankings. In fact, cyber-crime has not ranked lower than second place in over a decade. By contrast, one notable change from the previous report is the rise in concerns associated with artificial intelligence. Perhaps unsurprisingly, given the recent explosive growth in the use of generative AI, it has risen to second position, up from seventh in the previous edition.

“Overall, the results of this report paint a picture of an industry under pressure from persistent external shocks – cyber threats, technological disruption, climate change, and geopolitical instability – while also facing internal challenges of modernisation, regulation and talent. It is a reminder that the risks insurers face are both interconnected and fast evolving.”

Keyur Patel, Author of Insurance Banana Skins 2025, said:

“The environment in which the industry operates is changing faster than ever, and insurers will need to challenge some fundamental assumptions – related, for example, to their vulnerability to cyber-attacks, the immediacy of climate risks, and what the future of insurance looks like in a world increasingly defined by AI. How do insurers stay relevant to customers? Are existing business models fit for purpose? The tone of the responses we received suggest that when risks are known, the industry is often well prepared – but the looming unknows could ultimately define its future.”

-Ends-

Notes to Editors:

The survey was conducted from June-August 2025 and is based on 698 responses from 42 territories.

In the questionnaire, respondents were asked to describe, in their own words, their main concerns about the insurance sector over the next 2-3 years. They were then asked to score a list of 23 potential “Banana Skins” or risks from 1 (least severe) to 5 (most severe).

About LFBF CSFI

The CSFI is a think tank – part of The London Foundation for Banking & Finance (LFBF) – where financial services professionals and observers can share ideas about the challenges and opportunities facing the sector. To find out more go to: csfi.lfbf.org.uk