Managing climate and natural disaster risk

Losses from floods, storms, earthquakes and other natural catastrophes can have a dramatic impact on the citizens and economies of entire countries. Insurance helps people, businesses and societies to get back on their feet after disaster strikes.

Hurricane Matthew and the Louisiana floods are just two examples of events that killed many and destroyed the livelihoods of even more. Total economic losses from disaster events in 2016 almost doubled to USD 175 billion, primarily due to natural catastrophes. This shows that our world is still not resilient enough to avoid the negative effects of natural disasters – let alone to assure the funds needed to rebuild affected communities after a disaster.

Italy has experienced an increase in serious flooding over the last decade. One of the expertise publications we published in 2016 describes a new approach to improve insurance protection in the country against this risk.

In the future, these negative effects will become even more severe. The expectation is that, as a result of climate change, extreme weather events like hurricanes and floods will increase. Moreover, rising losses will also come from higher concentrations of assets in exposed areas, in particular in the world's rapidly growing cities. If no action is taken, climate change could cost the world economy an estimated 20% of global GDP by the end of this century.

By financing measures to mitigate disaster risks and adapt to climate change, we can strengthen the resilience of citizens, businesses, local and national economies and societies. As insurance puts a price tag on risk, it helps to create an incentive to invest in prevention measures.

Understanding natural catastrophe risks and the impact of climate change is critical to cost our business accurately and to structure sound risk transfer solutions. By sharing this knowledge, we help our partners to identify cost-effective protection measures to protect themselves. In addition, we provide solutions to cover the residual risk that cannot be avoided.

Our notable achievements in 2016:

• We published new expertise publications on floods and earthquakes for Switzerland, Argentina, Italy, Canada and California, which provided the basis for discussions with stakeholders in these countries, ranging from insurers to government officials;
• We released a totally new version of our CatNet^® services tool which brings the benefits of our big data & smart analytics skills in natural catastrophes to our stakeholders (see CatNet®: free natural hazard information for our clients);
• Through conferences, publications and social media channels, we communicated how we used a brand new concept to insure Guangdong Province against losses of up to USD 350 million from tropical cyclones and excessive rainfall (see Ramping up natural disaster insurance in China).