Swiss Re Study Finds Risks Becoming More Interconnected

Risks across financial, digital, natural-hazard, and socioeconomic systems are becoming more interconnected, creating additional pathways through which shocks can spread through the economy, according to the Swiss Re Institute study The Age of Interconnected Risks: How Interdependencies Are Shaping the Next Generation of Systemic Crises, developed with the London School of Economics. The study identifies rising economic imbalances, stronger interdependencies, and concentrated critical infrastructure among the factors increasing systemic vulnerabilities.

According to Swiss Re, analysis of risk disclosures from 91 Fortune 100 companies with multinational operations found that the average number of risk interconnections identified by companies has increased 24 percent since 2019. The analysis compared Form 10-K filings published in early 2019 with annual reports published in 2026 to examine changes in companies' perceptions of risks and their relationships.

Three areas have broadened significantly since 2019, per the study. The share of companies reporting artificial intelligence (AI) and new technology risk increased by about 30 percent, climate change risk increased by about 31 percent, and risks related to strains in the socioeconomic environment increased by about 22 percent. AI risk, previously concentrated largely in the technology sector, is now reported across industries including retail, airlines, pharmaceuticals, and food production.

Supply chains are another significant point of connection, according to Swiss Re. Geopolitical developments, tariffs, climate events, pandemics, and cyber risks can interact through supply networks, creating multiple routes through which disruptions can spread. The study also notes that supply chain risk is significantly more relevant for internationally focused companies than for more domestically focused companies.

AI and Digital Infrastructure Add New Connections

AI could change how shocks move through financial and economic systems, according to the study. Increased reliance on similar models could reduce behavioral diversity, while AI-supported financial transactions and investment decisions could make portfolio reallocations, liquidity withdrawals, margin calls, and collateral adjustments faster and more synchronized. At the same time, the study recognizes AI's potential to improve productivity and partially offset other systemic pressures.

According to Swiss Re, concentration within digital infrastructure also creates potential single points of failure. Three companies controlled 70 percent of global cloud infrastructure in 2024, while three companies processed 97 percent of global credit card transactions. Such concentration can also create accumulation risk for (re)insurers because a single outage or cyber event could result in simultaneous claims involving otherwise unrelated insureds and multiple lines of business.

Natural Hazards and Critical Infrastructure

Natural hazards can develop into systemic risks when they affect concentrated infrastructure that other parts of the economy depend on and cannot readily be replaced, per the study. Swiss Re Institute estimates that global insured natural catastrophe losses are rising by 5–7 percent annually, with exposure growth, urbanization, and intensifying climate hazards contributing to the increase. Exposure growth alone accounts for more than 80 percent of weather-related insured loss growth globally.

According to the study, more than one-quarter of US data centers are located in areas experiencing at least 3 large-hail days annually, and more than 40 percent are in areas with significant to very high tornado risk. In Taiwan, about 88 percent of semiconductor plants are located in areas of extreme seismic risk. Disruption to this type of concentrated infrastructure could extend beyond direct property damage when other industries depend on the affected services or production.

Systemic Risk Extends Across Multiple Areas

Swiss Re said the significance of interconnectedness depends not simply on the size of an initial event but on the network through which the event spreads. Relatively small shocks can produce disproportionate effects when vulnerabilities accumulate, transmission channels reinforce one another, or critical functions are concentrated in a small number of locations or providers.

Interconnection itself is not necessarily destabilizing, according to the study. Diversified networks can absorb and disperse shocks, and (re)insurance can support this function through global risk pooling, geographic diversification, and offsetting exposures. The study notes that these mechanisms depend on the ability of capital to move across borders.

At the same time, traditional policy tools for responding to systemic stress are becoming more constrained, per Swiss Re. Limited fiscal capacity and geopolitical fragmentation can weaken international crisis responses, while an increasingly complex and decentralized financial system can reduce the effectiveness of monetary policy transmission.

Building Resilience Before a Crisis

According to the study, managing systemic risk requires greater attention to dependencies and concentrations rather than assessing risks individually. The study calls for scenario analysis, more frequent stress testing, mapping of cross-sector dependencies, and stronger shock-absorbing capacity to help organizations understand how disruptions could move across interconnected systems.

Swiss Re also identifies reducing excessive concentrations in suppliers, technology platforms, critical infrastructure, and financial systems as a resilience measure. Where concentrations cannot be eliminated, the study points to diversified sourcing, strategic inventories, trusted partnerships, and investment in alternative capabilities as possible ways to reduce dependence on individual critical nodes.

Finally, the study calls for expanding risk-transfer capacity for systemic risks that may exceed private-sector capacity, including pandemics, extreme cyber accumulation, and widespread critical infrastructure failures. According to Swiss Re, layered approaches combining public resources, (re)insurance, and capital-market instruments such as insurance-linked securities could increase available capacity. The study also emphasizes maintaining open capital markets and cross-border reinsurance to support international risk pooling and preserve the ability to transfer risk.