The potential impacts of climate change and required adaptation has been on the re/insurance industry’s radar, but what needs to happen, is adaptation at scale, according to Veronica Scotti, Chairperson Public Sector Solutions, Swiss Re.
Speaking on a panel last week at the annual World Economic Forum (WEF) in Davos, Swiss Re’s Scotti highlighted the more than 50% rise in average losses from extreme weather events over the last 25 years.
Reasons for this, she explained, are urbanisation, concentration of assets, but importantly, it’s also “very, very clear” that it’s related to climate change.
According to Scotti, for the insurance industry, adaptation has been on the map for some time.
“We published the economics of adaptation ten years ago, we developed the methodology, and you know the statistics very well – for every dollar of adaptation you actually get five dollars downstream. So, it is very doable. What needs to happen, is adaptation at scale,” said Scotti.
Climate change has a vast societal impact and its regressive nature means that climate resilience financing needs to reach the poorest and most vulnerable.
“So, we need to create a bridging mechanism otherwise it is going to become very difficult socially,” said Scotti.
Swiss Re, alongside other members of the Insurance Development Forum (IDF), has taken steps to address this issue and in partnership with the UN Development Programme (UNDP), committed $5 billion of capacity to support climate resilience in developing countries.
“That is extremely important because they don’t really have a plan b, so we have to find ways to help them adapt,” continued Scotti.
Another thing that is required in order to scale adaptation is greater investment in nature-based solutions, something Scotti feels is currently very undervalued.
“But, with innovation, and with insurance, because we recognise there is value and relate it to that loss of value, there is a risk component, and when you link the two together, actually, we can do pretty creative things,” said Scotti.
At the 2018 World Ocean Summit in Mexico, the development of a Swiss Re-backed, innovative parametric insurance solution designed to help the conservation of the Mesoamerican Reef was announced.
The solution offers protection to some of the world’s most unique and important coral reefs. A healthy coral reef can lower economic losses caused by hurricanes and storms, and, the health of a coral reef is also vital to the local region and industries that rely on the ecosystem.
Resilience-linked solutions like this provide valuable protection linked to a climate-related event, but also provide clear benefits for the local community. Scotti told the audience that products like this can be scaled and leveraged in many parts of the world.
“That could be replicated across many other nature-based solutions that are being considered by the high level panel,” she said.
Concluding, “So, there is a lot that the industry could do and I hope that I can create more optimism because it doesn’t take ten years. I think that five years from now, we already see a tectonic shift, if we maintain the momentum.”