Climate change prompts ‘forceful model adjustment’ at Swiss Re, says CFO

“Changes in climate have caused us to forcefully adjust our model, and we expect to see increases in our summer pricing,” said John Dacey, group CFO of Swiss Re, at the reinsurers annual results 2019 media conference on Thursday 20 February.

The reinsurer reported a profit rise of 73 percent, rising from $421 million in 2018 to $727 million. However, this profit rise was less than expected and Dacey believed this was due to a series of man-made and natural disasters as well as expenses on the US casualty side.

The company pointed to losses from typhoons in Japan, hurricanes in the Atlantic and wildfires in Australia as significant natural catastrophe events impacting the company's results.

Climate change and sustainability have been a key focus for Swiss Re for a number of years, according to Christian Mumenthaler, group CEO, who explained the company's plans to cut business support in underwriting and asset management to the world's 10 percent most carbon intensive oil and gas producers by 2023. The move follows on from a history of support in the transition to a low-carbon economy. In 2017, the company shifted its focus to ESG criteria and in 2018 made a stance against thermal coal power.

“Our previous thermal coal policy means we won’t provide re/insurance to businesses with more than 30 percent of exposure to thermal coal across all lines of business,” said Mumenthaler, with the caveat of this applying only to businesses in developed countries.

Mumenthaler looked to 2030 as the year Swiss Re aims to achieve net-zero emissions. He added that the company plans to extract the carbon dioxide they have released from the atmosphere. The nascent technology used to extract carbon dioxide has also attracted interest from the likes of Microsoft.

In addition, the reinsurer assessed the ramifications of the Covid-19 coronavirus, noting the resulting business interruption, economic loss and impact on supply chains.

“We have been tracking the virus closely as we have a large reinsurance business in the Chinese life sector,” said Dacey. But he added that they don’t see the virus as a material issue for the insurance industry or for Swiss Re.

“The truth is that companies forget about the risk associated with pandemics, so there hasn’t been a demand for insurance. Though this may now change,” he added.

Finally, Swiss Re mentioned the recent partnership between its digital platform iptiQ and IKEA. HEMSAKER is a digital home insurance offering for customers in Switzerland and Singapore where customers can modify their level of coverage.