The World Economic Forum held its annual event at the Swiss Resort of Davos, where the insurance industry went on the offensive to pull the world's governments to task over the lack of proper risk assessment.

The event, which sees the world's business leaders meet with their political counterparts, was held last month. The insurance industry spelt out the threats that face the world and called on governments to appoint senior figures to handle risk.

The demand came on the back of the forum's Global Risk Report, launched in the run up to the conference, which highlights a growing disconnect between the power of global risks to cause major systemic disruption and the world's ability to mitigate them.

The annual Global Risks report was published in cooperation with Citigroup, Marsh and McLennan Companies, Swiss Re and the Wharton School Risk Center. It suggests that many of the 23 core global risks explored in the report have worsened over the last 12 months, despite growing awareness of their potential impacts. In addition to specific risk mitigation measures, institutional innovations may be needed to create effective responses to a complex risk landscape.

The report suggests that two such innovations - the appointment of Country Risk Officers and the creation of flexible "coalitions of the willing" around specific global risk issues – would provide crucial momentum to mitigation efforts.

A forum spokesman said: “The first would provide a focal point in government for mitigating global risks across departments, learning from private-sector approaches and escaping a 'silo-based' approach. The second would allow mitigation strategies to emerge from dynamic interplay between governments and business, achieving a balance between inclusiveness and decisiveness.”

The report has been greeted warmly by the insurance and reinsurance sectors. It recommends a number of key needs for addressing specific global risks, including:

● linking energy security with considerations on climate change;
● beginning work on a successor to the Kyoto agreement with three central principles - involvement of the United States and major developing countries (particularly China and India); differential responsibilities for future emissions' reduction dependent upon past emissions and stage of economic development; and, common overall responsibility for climate change;
● renewing terrorism insurance schemes scheduled to sunset in 2007 in some form; improving the framework for publicprivate arrangements in other countries, and,
● in order to prepare for a pandemic, governments should increase research into the identification of critical choke-points in the supply/value chain where skill sets are rare, interdependencies are greatest and the risk of triggering systemic failure is highest.

Jacques Aigrain, chief executive officer of Swiss Re, said: "Risks are often still viewed and dealt with in isolation. However, in today's world, global risks are tightly interwoven. To address our contemporary risk landscape, governments and enterprises need to take a holistic approach to overcome silo-thinking and acting. We need to prioritise risks effectively, improve preparedness and strengthen public-private partnerships to mitigate risks and to finance economic losses.”

He added: “Finally, we propose to coordinate global risk mitigation efforts by creating the function of Country Risk Officers at governmental level who regularly meet on an international level."

Michael Cherkasky, president and chief executive officer of Marsh and McLennan Companies (MMC), said: "While risk mitigation is set to be a key theme at this year's meeting in Davos there is continued evidence of a disconnect between risk and mitigation.

“The focus of government and corporations must not only be on reacting to events but on utilizing effective enterprise risk management to set priorities, increase business focus, allocate resources and maximize efficiency. Catastrophic natural disasters in recent years have demonstrated that our ability to confront emerging risks depends more on the choices we make before a disruption than the actions we take during a crisis. Only a systematic planning approach will ensure that countries and companies are prepared for the risk environment we presently face."

Thierry Malleret, director, Head of Global Challenges Team of the World Economic Forum, added: "This report makes clear that there exists a fundamental disconnect between risk and mitigation. While opinion suggests that levels of risk are rising in almost all of the 23 risks on which the Global Risk Network has been focused over the last year, the mechanisms in place to manage and mitigate these risks are inadequate; world leaders must act now. While the global economy has been expanding faster than at any time in history, it remains vulnerable."

The report says that, while some “tactical gains have been made” in specific areas, there needs to be greater access to risk mitigation tool with the emerging markets around the world.

However, the fear is that any tactical gains in terms of the way in which government or business understand the risk environment could be wiped away if there were to be a major risk event on the scale of the 9/11 or Hurricane Katrina.

A spokesman said: “Above all Global Risks 2007 makes the case for the active engagement of all sections of the international community in dealing with global risks.

“No one group has the ability to effectively mitigate most global risks. Interdependency implies not just common vulnerability but a shared responsibility to act.”