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Digital EditionWhen Risks Cascade: Why Interconnection Changes Everything
Peter L. Miller, CPCU, MS, MBA, is chief executive officer of The Institutes and a member of its Senior Management Team.
In conversations with risk management and insurance professionals lately, the word “interconnected” comes up. It describes increasingly complex and costly systems and the risks they create.
Risks that once felt discrete — a weather event here, a utility failure there, a supply chain disruption somewhere else — are increasingly understood as links in the same chain. When one breaks, others are stressed and may follow.
That’s a meaningful shift in how we think about managing risk. And it raises an interesting question: if risks compound and cascade, what does that mean for the value of identifying a potential threat sooner and preventing it from escalating into a bigger systemic threat?
I spoke about this with Pierre du Rostu, CEO of AXA’s Digital Commercial Platform and winner of the International Insurance Society’s 2025 Predict & Prevent award. He describes this situation as a “polycrisis,” in which risks don’t happen one after another but overlap, interlink, and amplify each other.
“In the past we were used to having one crisis after the other,” Pierre said. “But what we have observed for the past five-10 years is that now it’s not one after the other, but we have crises that are interlinked.”
He provided an example that resonated with me: climate risks create social instability, which can tip into geopolitical crisis, which opens the door to cyberattacks and supply chain failures, and a host of other consequences. There’s rarely a clean boundary where one risk ends and another begins.
That’s a significant observation for insurance, which has historically been very good at pricing and managing discrete, individual risks.
AXA is far from alone in taking this broader view. Many insurers and reinsurers are raising awareness of interconnected risks and investing in expertise and tools to better manage these complex exposures.
“Risk is no longer linear; it is networked. And when risk is networked, shocks travel faster and farther than many traditional models anticipated,” said Adrian Hall, CEO USA at Swiss Re Corporate Solutions, in a recent Risk & Insurance report.
If networked risks increasingly compound and cascade, what does that mean for when and how we intervene? At its most basic level, the insurance model — waiting for a loss to occur, then paying a claim — was designed for a world where risks seemed more contained. But today we recognize that, by the time a loss is visible enough to trigger a claim, it likely already has set several other things in motion.
Encouragingly, along with this increased awareness, there’s also growing recognition that the tools now available to insurers and risk managers make earlier intervention not just possible, but increasingly practical.
IoT sensors in homes, commercial buildings, and infrastructure are generating continuous data streams. AI systems can process those streams and surface meaningful signals — anomalies that a human analyst would never catch at scale. And the distribution channels already exist to get these tools into the hands of policyholders. The elements to manage these connected risks, in many cases, are already there.
The professionals who start recognizing the value of earlier intervention, in their own organizations and with their own clients, are likely to find themselves ahead of a shift that’s already underway. &
