The Head of Property & Specialty Underwriting at Swiss Re has said firms across the world need to challenge their thinking in how they do business in order to deliver a sustainable future.
Writing on the steps businesses need to take to enhance sustainability Mike Mitchell said a willingness to sign up to pledges on sustainability needed to be supported by internal challenge.
“Every headline these days seems to focus on the COVID-19 crisis,” he said. “The ongoing pandemic is front of mind for most people, understandably and rightly so. However, I see constant reminders of another pressing issue, which is also a pervasive threat: climate change.”
He added there are palpable signs of climate change in all parts of the world.
“Like many of our clients, Swiss Re signed the Paris Pledge for Action in 2015 and most recently the ‘Business Ambition for 1.5 °C’ at the UN Climate Action Summit in 2019,” Mr Mitchell added. “The aim of these initiatives is to strengthen the global response to climate change and advance a low-carbon future.”
However, he said importantly, Swiss Re’s approach to sustainability challenges its conventional way of thinking.
“We must always ask ourselves the question: how does the business we write impact, support or detract from sustainability? As we move ahead in our journey together with our partners, we’re bringing more and more new sustainability products and solutions to market.”
Mr Mitchell said the reinsurer saw three key areas where it saw particular opportunities for the reinsurer and its clients.
The first is a drive to support low carbon transportation.
“Under legislation issued prior to the COVID-19 outbreak, Chinese cities focused on banning vehicles that have traditional combustion engines from the roads, replacing them with New Energy Vehicles (NEVs) to help reduce greenhouse gas emissions,” explained Mr Mitchell. “This trend comes with a new set of challenges for the automotive industry and its stakeholders, not only around battery failure, but also around sustainability, and consumer peace of mind.”
He said Swiss Re has developed solutions, such as a new extended warranty product, providing long term protection against battery failure. It is also looking at the broader changes in mobility and how to address these holistically.
Secondly is the threat to global agriculture.
“According to the latest Swiss Re Institute’s sigma publication, Agriculture is a line of business highly susceptible to climate change,” he added. “Severe drought impacts crop yields and earlier starts to the growing cycle can make crops more vulnerable to extreme frost events.
“Until recently no insurance against such events was offered. Swiss Re’s Soil Moisture Index is closing this protection gap. We are now making it available in 10 countries to farmers who want to protect their crops.”
The need to close the protection gap is the third key issue added Mr Mitchell.
“Scientific evidence is clear: climate change is affecting natural catastrophe activity,” he explained. “Many are starting to ask for impact assessments covering future climate change scenarios. Swiss Re is embedding macro trends such as climate change and urbanisation in the NatCat underwriting processes. Assessing its impact requires modification of NatCat models and re-running of these models on the client’s portfolio.
“We are working on a prototype, whereby by implementing different climate change scenarios in Swiss Re’s proprietary NatCat models, we will be able to run exposure with current versus future climate change scenarios.”.
However, Mr Mitchell explained that while future planning was important the challenges of today could not be ignored.
“Science leads us and our partners to focus on scenarios of 2030 or 2050,” he concluded. “While this is important, we also need to focus on the now and explore how our climate change expertise can help us better prepare for the future by taking action today.”