Natural catastrophes and climate change

USD 2.6 bn

Natural catastrophe premiums in our P&C Reinsurance business

(USD 2.9 billion in 2014)

Natural catastrophes are a key risk in our Property & Casualty (P&C) business. The damage caused by floods, storms, earthquakes and other natural disasters can affect millions of lives and the economies of entire countries. In 2015, the total worldwide economic losses from natural and man-made catastrophes were estimated at USD 92 billion – of these, USD 37 billion were insured. Having access to effective re/insurance protection against natural catastrophes creates significant benefits for our clients – as well as society at large. In 2015, we received USD 2.6 billion of P&C Reinsurance premiums for natural catastrophe covers (for losses larger than USD 20 million), which was equivalent to 17% of total premiums in this business segment.

On average, both economic and insured losses caused by natural catastrophes have increased steadily over the past 20 years. The key reasons have been economic development, population growth, urbanisation and a higher concentration of assets in exposed areas.

This general trend will continue. But crucially, losses will be further aggravated by climate change. The scientific consensus is that a continued rise in average global temperatures will have a significant effect on weather-related natural catastrophes. According to the Special Report on Extremes (SREX, 2012) and the Fifth Assessment Report (AR5, 2014) published by the Intergovernmental Panel on Climate Change (IPCC), a changing climate gradually leads to shifts in the frequency, intensity, spatial extent, duration and timing of extreme weather events.

If climate change remains unchecked, the makeup of the main drivers will thus gradually shift, with climate change accounting for an increasingly large share of natural catastrophe losses.

To assess our Property & Casualty business accurately and to structure sound risk transfer solutions, we need to clearly understand the economic impact of natural catastrophes and the effect of climate change. This is why we invest in proprietary, state-of-the-art natural catastrophe models and regularly collaborate with universities and scientific institutions.

While the impact of climate change will increase gradually over the coming decades, most of our business is renewed annually and our risk models are refined every few years. Risks are normally covered for 12 months (up to five years for cat bonds). Thus, reinsurance premiums do not reflect expected loss trends over the coming decades. Rather, for underwriting and risk management purposes, our models provide an estimate of the current risk. But as natural catastrophe losses continue to rise as a result of the different factors described above, our models will gradually factor in this trend, since they are updated and refined at regular intervals.

In our Financial Report we detail the insurance risk currently posed to our business by severe instances of four types of natural catastrophes.

In addition to providing re/insurance covers, we offer our clients strategic expertise and integral risk assessments of natural disasters and climate adaptation. These include our Economics of Climate Adaptation (ECA) studies, free access for our clients to Swiss Re’s CatNet® tool and our expertise publications. (You can see a sample of our recent publications in “Selected communication products of 2015” and “Other Swiss Re publications”.)

Insurance stress tests

In our Financial Report we describe the insurance risk associated with natural catastrophes and disclose the expected impact on our economic capital of four types of single event losses with a 200-year return period (ie with a 0.5% probability): Atlantic hurricane, Californian earthquake, European windstorm and Japanese earthquake. See 2015 Financial Report.

CatNet®: free natural hazard information for our clients

The CatNet® tool offers our clients natural hazard information combined with Google mapsTM and satellite imagery. Its functions and data facilitate a professional overview and assessment of natural hazard exposure for any location worldwide. This makes CatNet® a valuable tool in preparing local, regional and cross-regional risk profiles. Its three main features are a natural hazard atlas, country-specific insurance data and a link to disaster statistics. More information is available at