Swiss Re, one of the world’s largest insurance and reinsurance firms, has made a pledge at the UN Climate Summit in New York to make $10 billion of its capacity available, as well as offering its expertise, to help nations strengthen their climate resilience.
The UN Climate Summit has seen some very interesting announcements of relevance to the reinsurance and insurance-linked securities (ILS) sector. This announcement from Swiss Re, a leading company in many of the UN’s initiatives on climate and disaster risk resilience, demonstrates both the reinsurance industry’s commitment to increasing resilience and also the opportunity for it to become a leading risk taker for climate resilience related disaster and weather risks.
Swiss Re’s Group CEO, Michel Liès, addressed government leaders at the UN summit and pledged to offer $10 billion of the re/insurers insurance capacity and its expertise to help nations make reality of the stringent climate strategies required by 2020.
Liès affirmed the re/insurance industry’s commitment to working alongside the international community to help increase climate resilience. Liès also explained that aligning capital and community interests, via the use of insurance, as an effective route forward. “This not only increases shock absorbing capacity, but adds rigor in terms of risk analysis and helps to incentivize risk reduction.”
“Despite some great examples where innovative sovereign climate risk financing solutions have been implemented, such as the African Risk Capacity, the Caribbean Catastrophe Risk Insurance Facility and the Pacific Catastrophe Risk Insurance Pilot, some 75 percent of catastrophe losses around the world are still uninsured, and the signals to incentivize climate risk reduction are not yet strong enough,” Liès stressed, explaining that access to insurance and risk transfer must be fast-tracked in such a way that climate-resilient development is supported.
One of the themes of the climate summit has been discussion of the need for more emphasis on sovereign disaster risk financing, with World Bank President Jim Yong Kim calling for this to be a key focus in the climate resilience initiatives.
pledged the following; “By the year 2020, Swiss Re commits to having advised 50 sovereigns and sub-sovereigns on climate risk resilience, and to have offered them protection of USD 10bn against this risk.”
Swiss Re says that up to 65% of climate risks can be averted through the use of risk management and resilience measures. The reinsurer said that it will multiply its climate risk financing capacity for sovereigns and subsovereigns, along side building a team dedicated to advising national and regional governments on how to better manage and protect themselves financially against disaster risk.
Once again the reinsurance industry continues to demonstrate its ability to lead in the discussion on climate risk, resilience and disaster risk financing.
Of course, the pledging of $10 billion of re/insurance capacity also clearly demonstrates the opportunity that Swiss Re sees it can gain by being one of the leaders in this discussion, something that no doubt the rest of the traditional and alternative reinsurance market will quickly follow.
The insurance-linked securities (ILS) sector and capital market investors also have a significant role to play here and over the years to 2020 (and beyond) could be called on to provide an equivalent amount of capacity, to cover climate resilience and disaster risks, as the traditional reinsurers by becoming fully engaged with these efforts.
Read our other articles covering the announcements, relevant to ILS and reinsurance, from the UN Climate Summit: