Social, environmental trends pose greatest risks for insurers.

Global climate change and its effects present the greatest risks facing the property/casualty industry, according to a new study released by professional consulting firm Ernst & Young.

The study, Strategic Business Risk: Insurance 2008, also said the demographic shifts caused by mass babyboomer retirements offer both the greatest risk and greatest opportunity for life insurers.

Ernst & Young and Oxford Analytica interviewed more than 70 industry analysts from around the world to identify the trends and uncertainties facing the global insurance industry. Project members then developed a ranking of the 10 most important potential risks facing the industry in 2008, and found many of them interlinked.

Changing weather patterns may alter assessments concerning the probability of insured loss by windstorm and flood and force insurers to reconsider insurability criteria, such as in Florida, the study said. Reserving and pricing policies also would be affected.

Global climate change also plays a role in catastrophic events, which the report ranked as the third highest potential risk for insurers in 2008.

Regarding retiring baby boomers, the study said: "As this group reaches retirement age, their financial needs will change and they will look for products to fill the gap. In responding to this opportunity, insurers are stepping into a role that has, for a generation at least, been played by governments. This is a significant risk."

The life industry faces "intense political pressure in cases of failure, intensified public scrutiny and greater regulatory pressures," the white paper continued.

As "second-tier" risks, the report cited efforts to penetrate emerging markets; the threat of increased regulatory intervention; efforts to adapt channel distribution to new technologies; and changes in the security markets that lift the barriers between insurance companies and other financial institutions.