Beat Strebel,CEO, China, Swiss Re
These lesser understood risks are increasingly becoming a source of insurance payouts as extreme weather events lead to billions in economic losses. Traditionally, reinsurers — which provide coverage to insurance companies — haven’t paid much attention to the distinction between secondary perils and larger catastrophes, but that is changing given the growing frequency.
Being able to predict the environmental risks that follow a major natural disaster represents an untapped business opportunity for the insurance sector, according to the head of reinsurance firm Swiss Re AG’s China unit.
Risks associated with catastrophes such as hurricanes are well understood, “because we have been modeling them a lot,” country president Beat Strebel said at the World Economic Forum’s annual meeting in Tianjin.
Insurers are less familiar with so-called “secondary perils”, or disasters that follow a major event — such as drought after wildfires, or flash floods in the wake of a hurricane.
“We are still lacking data and good models to deal with those,” he said. “It’s a big business opportunity but it comes with challenges,” he added.
These lesser understood risks are increasingly becoming a source of insurance payouts as extreme weather events lead to billions in economic losses. Traditionally, reinsurers — which provide coverage to insurance companies — haven’t paid much attention to the distinction between secondary perils and larger catastrophes, but that is changing given the growing frequency.
The value of global assets exposed to climate risk is likely to grow by as much as 7% annually through the next 10 to 20 years, according to Strebel.
“A concerning element is that most of these assets are not currently insured,” he said.
On average, just 40% of economic losses due to major environmental catastrophes are covered, said Strebel.
In China that’s far lower, and of the $10 billion worth of infrastructure damages attributable to a super typhoon that struck Hainan island last year, just $300 million were insured, he said.