Climate change a threat, but also largest growth opportunity: Swiss Re

Global reinsurance company Swiss Re forecasted that global premium growth is going to continue, as the need for insurance continues to grow, alongside heightened risk awareness, while client needs evolve at the same time.

Swiss Re forecasts that non-life insurance premiums will have grown 10% above their pre-COVID-19 level by the end of 2021, with continued increases predicted for 2022 and beyond.

All of which suggests a growing need for more risk capital, across insurance and reinsurance markets, highlighting the need for the industry to embrace efficient forms of funding, including insurance-linked securities (ILS) and third-party reinsurance capital partnerships.

“Heightened risk trends will increase the need for insurance protection, but also require a greater focus on evaluating and modelling, and ensuring pricing is adequate for the risks taken,” Swiss Re said this morning.

With underwriting results the main focus for an industry that continues to suffer the effects of a low investment yield world, expanding capabilities in technology and data are expected to be vital.

Swiss Re’s Chief Executive Officer Reinsurance Moses Ojeisekhoba explained, ”There is a clear recognition that claims’ frequency and severity is rising as demonstrated by recent natural catastrophes or cyber incidents. This means the need for protection is growing, and the industry has important work to do in offering insurance and closing the protection gap. Swiss Re’s extensive risk knowledge and very strong capital position allow us to support our clients in their growth ambitions.”

Climate change is the biggest long-term threat to the global economy, Swiss Re explained, which means there is an increased need for protection.

But with risks rising Swiss Re warns of the need to price risks adequately, but adds that all this means there is a positive outlook for premiums as these will need to reflect the increased exposures.

Climate change is a real threat, but it is also the biggest growth opportunity in insurance and reinsurance, Swiss Re also said today.

Here the reinsurance firm is really referring to the investment side, as “investments in the order of USD 6.9 trillion a year will be required.”

But this is also going be one of the biggest growth opportunities on the underwriting side as well, as both risk and investment related to climate change and resilience need to be protected and financially hedged.

Just the other day Swiss Re said that climate risk is going to be a major driver of P&C reinsurance growth, but that it will also drive catastrophe losses much higher as well.

As the company looks to integrate multiple sources of underwriting capital in its business, ILS capital is going to become an important way for the reinsurers like Swiss Re to provide the climate risk protection the world is going to require.

Which explains why its integrated capital franchise approach is now so important to it.

Swiss Re’s Group Chief Underwriting Officer Thierry Léger commented, ”As the risk landscape evolves and risks become more complex, there needs to be an even greater focus on evaluating and modelling these risk trends and ensuring pricing is adequate for the risks taken. Therefore, the importance of underwriting capabilities is further increasing, all the more given the persistent low interest rate environment. Accordingly, at Swiss Re we continue to focus on scientific, technology- and data-driven underwriting approach.”

Swiss Re is investing in its own capabilities to ensure it can capitalise on the opportunities of premium growth, climate change and other new and emerging areas of risk, where its expertise and capital can be put to work.

Moses Ojeisekhoba said, ”We work with leading partners to address problems across the insurance value chain. We are convinced that through these partnerships and by leveraging Swiss Re’s global capabilities and experience, we are best positioned to help our clients maximise value while driving measurable impact. This way, we collectively unlock new business models across the industry, push the boundaries of insurance and reduce protection gaps.”

Also watch our recent video interview with Swiss Re CEO Christian Mumenthaler.