Investment related risks are the biggest threat to reinsurance firm Swiss Re’s profitability, closely followed by the risks posed by major pandemic outbreaks, according to Christian Mumenthaler, Chief Executive Officer.
In a recent interview with NZZ am Sonntag, the CEO of reinsurance giant Swiss Re explained that the greatest threat to his firms business, as even though the reinsurer invests conservatively, a sharp rise in interest rates could impact it heavily.
With such large investment portfolios, global reinsurance players like Swiss Re could be particularly exposed to abrupt changes in direction of rates.
Mumenthaler explained that if corporate bond rates shot up rapidly it could “melt” Swiss Re’s capital, implying an erosion of capital adequacy triggered by mark downs on investment portfolio positions.
Aside from the threat posed by fluctuating global investment markets, Mumenthaler explained that pandemic risk is the major threat on the risk side of the balance-sheet.
“Pandemic is probably the biggest risk for us, as we are very heavily involved in life insurance,” Mumenthaler said.
He went on to say that the most likely cause of a major pandemic risk event is flu virus outbreak, saying that millions could die in a repeat of a flu outbreak akin to the Spanish Flu in 1918.
Mumenthaler also said that geopolitical risks have increased sharply, in his opinion, with the threat posed by North Korea particularly underestimated and discussed climate change in the interview, saying that it is likely that damages will increase overall due to climate changes.
