The insurance industry is at a crossroads, warns a new report.

And the survey by professional services firm PwC said that insurance and reinsurance face more upheaval than any other financial services sector.

The report, entitled Insurance 2020 and beyond: Necessity is the mother of reinvention, said that more than half — 56 per cent — of insurance CEOs said the new money flooding into the market from alternative sources posed a threat to their prospects.

“The industry is at a pivotal juncture as it grapples with changing customer behaviour, new technologies and new distribution and business models,” said the report.

PwC Bermuda leader and insurance leader Arthur Wightman said: “The changing market will require considerable product and business model redesign.

“This won’t be easy, but it’s the new reality.”

The report said that social and technological changes would affect the way the insurance and reinsurance sectors do business.

And it added environmental changes in weather patterns, as well as economic and political developments would also affect business.

Mr Wightman said: “The implications of these trends are altering the way insurers compete. For example, moves to mitigate traditionally uninsured or underinsured catastrophe risks and control losses are increasing.”

And the report added: “The world is facing an increasingly complex, uncertain and in some important areas underinsured risk environment as climatic instability makes once unthinkable disasters seem almost commonplace.”

Mr Wightman said: “Reinsurers have an important role to play in the recently announced G7 climate risk insurance initiative which aims to help developing countries manage climate-related, change-related disaster risk.

“Industry support of the development and introduction of climate insurance solutions is critical.”

Catastrophe losses have soared since the 1970s, with 980 catastrophe losses recorded last year alone, amounting to $110 billion in losses and an insured loss of $30 billion around the world.

The report added that better technology and data, as well as the ability to locate and respond to disasters faster than ever before would help manage losses and protect human life — but that some predictions suggest that the potential economic losses will still increase by 160 per cent by 2030 compared to 1980.

It also said that shifts in global production and supply had increased the value at risk in underinsured territories — like the $12 billion of losses from the Thai floods of 2011.

And the report added that a new generation of catastrophe models were creating a major expansion in geographical breadth and underwriting applications.

It said: “Until recently, cat models primarily concentrated on developed market peak zones, such as Florida windstorm.

“As the unexpectedly high insurance losses from the 2010 Chilean earthquake and the 2011 Thai floods highlight, this narrow focus has failed to take account of the surge in production and asset values in fast growth South American, Asian, African and the Middle Eastern markets to allow for effective underwriting.”