The prudential regulator has identified social and environmental changes as risks to insurance industry stability.

The Australian Prudential Regulation Authority’s new System Risk Outlook flags international and domestic threats.

It says the nation’s ageing population is affecting how policyholders engage with insurance, and that younger generations interact differently with the financial system.

A new risk could come from commentary on social media that might threaten a financial institution, such as by triggering a run on a bank.

Rises in the frequency and severity of major weather events are affecting the affordability and availability of insurance, and the interconnectedness of Australia’s financial system creates risk from geopolitical events. Financial services can be disrupted or threatened by outages or cyberattacks, it says. 

“Because Australia’s financial system has, over time, become more interconnected, more dependent on digital technologies and more reliant on third-party service providers, an operational failure in one part of the system could have cascading effects across the entire system and undermine financial stability.”

APRA also says high household debt is a key vulnerability in the financial system.  

Find the report here.