Christian Mumenthaler, Chief Executive Officer (CEO) of Swiss Re, has asserted that adequately pricing in the effects of climate change to its policies is a “complete priority” for the reinsurer.
His comments came as part of a media call held alongside the release of Swiss Re’s results for 2022, during which leaders discussed how the warming climate could impact the re/insurance industry.
Swiss Re announced net income of $472 million for 2022 compared with $1.4 billion a year earlier, as the impact of economic inflation on expected claims impacted its P&C businesses, and large natural catastrophe losses exceeded expectations at $2.7 billion.
On the topic of cat losses, Mumenthaler granted that it remains uncertain how climate change is interacting with some losses such as hurricane.
But for other secondary perils such as flood and drought, he maintained that it is “scientifically clear that there’s significantly more losses.”
Accordingly, the reinsurer has worked to adapt its models over the last several years, in order to better understand how these kind of losses will evolve, and how it can continue to provide cover for them in a sustainable way.
“On climate change, this is a huge industry topic, it’s a huge topic for our investors, as you can imagine. And so, there’s a lot of pressure, a lot of questions, certainly last year, do you know what you’re doing and all of that,” Mumenthaler explained, noting that Swiss Re maintains some 50 scientists in house to work on its modelling capabilities.
However, a consequence of adjusting these models is that prices must rise in line with the risk, which means that consumers ultimately end up paying more under the current system, he added.
“These are pricing signals for, if you build houses in the floodplain, you will see insurance go up and up and up, until you either build a house in such a way that it’s safe, or you build it somewhere else,” Mumenthaler said.
“The topic of not being able to cover at all is not yet a big topic because you can still price everywhere, but clearly the prices are going up and this will have some political backlash depending on where you are, in which country you are,” he concluded. “So, it’s a complete priority for us to be on top of that and try to understand trends and price it correctly.”
