Asia faces the real climate fight, warns Swiss Re’s Varbanov

“The war on climate change isn’t going to be won or lost in Europe or Africa, because there isn’t enough coal-fired power generation there, nor is there much being built. It’s going to be decided here in Asia.”

This striking statement was made by Lubomir Varbanov, managing director and head of public sector solutions Asia-Pacific at Swiss Re, who met EAIC Today in Hong Kong to discuss the unique challenges—such as the battle against climate change—and the opportunities that will shape Asia and the insurance industry’s role in navigating them.

Varbanov said the market is in a state that some people are describing as a “polycrisis”—a convergence of multiple, interrelated risks. It is a term first coined by the World Economic Forum last year after it stated “a new descriptor to define the scale of the problems the world is facing” was needed.

“We’re not dealing with just one or two challenges,” Varbanov said. “It’s a constellation of risks, including geopolitical instability, energy security, climate change, and supply chain disruptions, that requires a holistic approach.” 

This complexity, Varbanov pointed out, presents both significant challenges and unprecedented opportunities for the insurance industry. “The question is how we rise to it, individually as Swiss Re but also collectively as an industry,” he said, highlighting that Swiss Re’s focus on the public sector—including partnerships with governments, state-owned enterprises, and multilateral development institutions—positions the company well to tackle these crises. 

Closing the gap

One of the most pressing challenges Varbanov highlighted is the widening protection gap in natural catastrophe coverage, especially in Asia-Pacific. “If you consider the global protection gap in natural catastrophes, it’s worth taking a look at what’s been happening in the industry over recent years,” he said. 

“We used to say that a year with insured losses exceeding $100 billion was a heavy year. But now, four of the last five years have breached that level.”

In 2023, global insured losses from natural catastrophes reached $108 billion according to Swiss Re’s March sigma report. By mid-2024, that number had already hit $60 billion, with $8 billion coming from Asia-Pacific alone, Varbanov highlighted, citing findings from a sigma report released in August. 

“We’re seeing a reality where extreme weather events are becoming more frequent, more severe, and the geographic patterns are shifting,” Varbanov explained. This, he said, represents an opportunity for expansion of risk transfer capabilities, but it will require partnerships with governments and other stakeholders to be effective.

Varbanov stressed that the insurance industry’s role extends far beyond simply absorbing shocks after disasters. “The insurance industry is often seen as a shock absorber, and that’s correct, but it’s also incomplete,” he noted. 

Instead, he argued, the industry can add significant value at earlier stages, particularly by helping to design and implement climate-resilient infrastructure and projects.

“Certain pieces of the jigsaw can be placed only by government to overcome the complex challenges facing the region,” he said. Partnerships, Varbanov explained, are key to fostering innovation and building resilience.

“Opportunities are often defined by need,” he said. “And in Asia, the need is clear.”

Data matters

One area of opportunity Varbanov highlighted is the use of data and analytics to inform better decision-making, particularly in areas such as zoning regulations and infrastructure development. 

“We’ve partnered with local governments in Australia to use our analytics to better calibrate their zoning regulations,” he shared. By doing so, municipalities can steer construction away from areas particularly prone to climate risks, creating more resilient communities.

“Parametric products can fill gaps that traditional insurance cannot.”

He cited the example of renewable energy transmission infrastructure, which has historically been underinsured. “The industry has not covered transmission assets, and it’s a big gap,” Varbanov pointed out. Swiss Re has stepped in to provide solutions for this gap, particularly in countries such as the Philippines, and plans to explore similar opportunities in New Zealand.

Varbanov said the use of insurance-linked securities, such as catastrophe bonds, is gaining interest across Asia. He cited the Philippines and New Zealand as examples where governments have successfully used catastrophe bonds to transfer risk. In Hong Kong, Swiss Re has been involved in bringing a cat bond from Chile to the Hong Kong Stock Exchange, signalling growth in alternative risk transfer solutions.

Parametric insurance, which provides automatic payouts after an event if predefined triggers are hit, is one area where Varbanov sees growing potential. 

“Complex challenges such as climate change require systems thinking and an integrated approach,” he said. “These parametric products can fill gaps that traditional insurance cannot, particularly in emerging areas such as renewable energy and transmission infrastructure,” he noted. 

For more news from the East Asian Insurance Congress conference (EAIC) click here.

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