Swiss Re Urges Private-Public Partnerships to Tackle Climate Adaptation

August 26, 2008

According to a new report from Swiss Re,” new forms of private-public partnerships are required to anticipate and respond to the risks related to climate change.”

The Group’s Chairman Peter Forstmoser presented the conclusions at the International Disaster and Risk Conference (IDRC) in Davos. The conclusion stresses the benefits of a risk management approach to climate adaptation.

“The impact of hazardous events is continuing to rise, driven by interacting forces, including global warming, population growth, density of assets and the increasing vulnerability of ageing infrastructure;” explained Swiss Re. “Such developments and the exposure to climate change in general fall disproportionately on developing nations, partly due to their limited capacity to adapt financially.”

In addition the report notes that “insurance penetration is still low in developing countries, resulting in a significant gap between insured and total economic losses if a natural disaster strikes. At the same time, developing countries will have to bear the highest share of the climate adaptation costs emanating from climate change.

“By 2030, it is estimated that these costs will amount to CHF 49 to 171 billion per year [$44 to $154 billion] – of which CHF 28 to 67 billion [$25 to $61 billion] will be required in developing countries.”

Forstmoser stated: “To cope with the financial consequences of climate-related disaster risks, new forms of private-public risk transfer will allow governments, development banks or NGOs to leverage their funds through the use of insurance and capital market instruments.”

Swiss Re also noted that it had “recently secured a lead role in the Caribbean Catastrophe Risk Insurance Facility (CCRIF). This facility is a good example of how new forms of public-private risk transfer can make societies more resilient by securing finances before an event occurs. Established in 2007, the CCRIF insures government risk. It is designed to limit the financial impact of catastrophic hurricanes and earthquakes to 16 Caribbean governments by quickly providing short-term liquidity when a policy is triggered by an event.”

Forstmoser added: “Concern about climate change and extreme weather are motivating governments to assess risks more efficiently to minimize social and economic effects. Insurance solutions are part of the equation, for example, to fill funding gaps in responding to catastrophes. While they complement risk reduction and risk prevention, they do not substitute the need for good policy and practice. Swiss Re strongly supports the concept of Country Risk Officers to help governments actively manage risks holistically, within the country and even across borders.”

Swiss Re advocates the placement of a “Country Risk Officer, comparable to the role of a Chief Risk Officer which is common today in global corporations,” as a “useful model to develop an integrated perspective across the social, economic and environmental risks of a country.

“The Country Risk Officer would take the lead in creating a national risk landscape, promoting the common understanding and forward-looking dialogue essential for risk prevention and adaptation measures.

“In order to promote effective country risk management practices, Swiss Re earlier this year announced that it will finance a new Chair for Integrative Risk Management at the Swiss Federal Institute of Technology Zurich (ETH Zurich). The chair is part of the company’s Global Risk Engagement initiative and will support practical solutions for humanitarian challenges such as catastrophe prevention and instant disaster relief; it will also develop new risk transfer solutions with governments and non-governmental organizations.”

Source: Swiss Re – www.swissre.com

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