Q&A: Swiss Re Corp. Solutions’ Alex Pui talks sustainability
March 15 2021 by InsuranceAsia News
With climate change and sustainability increasingly dominating the conversation around (re)insurance solutions, Insurance Asia News (IAN) recently caught up with Swiss Re Corporate Solutions’ Alex Pui to discuss the risks associated with a warming world.
The Tokyo-based executive heads the insurer’s nat cat and sustainability operations in the Asia Pacific region and he highlighted the importance of sustainability plans and sharing regional data.
IAN: What are some of the key emerging climate risks for insureds in Asia?
Pui: According to research by the Swiss Re Institute, natural catastrophes caused US$76 billion of global insured losses in 2020 — up 40% from 2019 — mostly from secondary peril events. The effects of climate change are manifest most notably in the form of secondary perils, which are in turn driven by the increased moisture-holding capacity of warmer air, thus creating more violent storms and other extreme weather events. These events can be independent small- to mid-sized events such as droughts and wildfires or secondary effects of a primary peril — such as torrential rains and storm surge-induced flooding.
Due to a combination of rapid economic growth, high population density and regional climate change impacts, Asia Pacific is disproportionately vulnerable to these secondary perils, illustrated by heightened typhoon activity in Japan, widespread China floods, monsoon rains in South-East Asia, as well as hail and record wildfires in east Australia recently. To develop resilience against climate risk, insureds and businesses need to first understand the risks that climate change poses.
IAN: What kind of nat cat data is becoming more important for underwriting in the region? How can clients and brokers access this?
Pui: There is still much room for improvement in traditional sources of nat cat underwriting data. Areas for improvement include: more granular claims information and exposure characteristics and more granular location and occupancy details, particularly in developing countries.
However, with advances in data capture methodology and measuring stations, there is an emerging trove of data that will be critical in unlocking improved risk transfer solutions: satellite burn scars of bushfires, flood inundation extents; high resolution wind maps of tropical cyclone footprints; the availability of onsite water level censors or seismographs that could unlock new parametric and double trigger solutions.
For example, in Japan, where there is independent, high-quality observation networks with good coverage, we are looking to develop parametric wind and flood products to complement our established parametric earthquake offering based on the Shindo index.
IAN: How are corporates tailoring their sustainability criteria and risk profiles?
Pui: For corporates to make better strategic decisions, it is important that they understand the exposure and resilience of their assets to nat cat events in the near- to medium-term. As most corporates do not possess in-house expertise to address this challenge, Swiss Re Corporate Solutions have recently developed a climate risk solutions value-added service, which we have piloted with a number of clients.
For example, we assisted a sovereign wealth fund in better understanding the physical climate risk exposure to its real estate portfolio, which is spread across the world and vulnerable to a variety of climate threats unique to each geographic location. In addition, we also helped a large T&D provider with risk insights into Australian bushfire risks and recommended mitigation and risk transfer options.
IAN: How is Swiss Re Corporate Solutions developing its overall Asia nat cat and sustainability offering?
Pui: Climate risk knowledge underpins our nat cat and sustainability offering. We have 150 years of history writing climate risks, and we are sharing this experience to help clients identify trends and mitigate risks. Furthermore, we invest in climate risk research through the Swiss Re Institute and other academic partnerships, where we analyse key loss drivers and extreme weather trends and publish this analysis through our annual sigma nat cat and man-made disasters report.
Our overall sustainability offering globally is reflected in our Sustainability Strategic Framework for APAC:
Protecting our customer’s sustainability opportunities: supporting the transition to a low-carbon future by de-risking the investments that customers make into renewable energy.
Sustainability risk management: providing customers with the necessary climate risk knowledge to enable the implementation of appropriate mitigation measures to future extreme weather events.
Enhancing our sustainability leadership: leading the market in running our own business in a sustainable way with our Sustainability Risk Framework and providing reliable and innovative risk transfer solutions for nat cats.
Despite our best risk mitigation efforts, there would inevitably be events we will not be fully prepared for, which is known as residual risk, and this is where insurance has a role to play. Swiss Re Corporate Solutions’ ability to provide sustainable capacity, drawing on the Swiss Re Group’s strong balance sheet, as well as our expertise in providing innovative covers are key differentiators. These give us the ability to absorb large losses commonly associated with nat cat events and allow us to provide standalone earthquake covers in Japan, for example, when many others are not able to do so.
Lastly, cleaner energy sources such as renewable energy are vital to broader sustainability goals. As Asia turns to the production and use of renewable energy, we recognise that there are inherent risks in production, and we are committed to addressing these risks. Importantly, just as traditional insurance was a strong enabler of the industrial revolution, we are well positioned to catalyse the green transition in a genuine way, not just through supporting renewable energy sectors, but also withdrawing support — in a managed fashion — to polluting sectors.
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