Transcript Managing_Risk_in_a_Carbon_Constrained_World

Managing Risk in a Carbon
Constrained World
Presentation of
Christian Mumenthaler,
Chief Risk Officer, Swiss Re
Ruschlikon, Switzerland
5 November 04
Agenda
 Swiss Re
– Our Strengths
 The risk of climate change
– Awareness of Risks
– What does the Loss Data Reveal?
– Why should the Insurance Industry Care?
 What is Swiss Re doing? - Working towards solutions
– Research and Development
– Raising Awareness
– Sustainability is a Core Value
Page 2
– New Products and Services – the facilitation of GHG
emissions reductions
Swiss Re
 Founded in 1863, Zurich, Switzerland
 Operating in 70 offices in 30 countries
 Approximately 8,000 employees
 In assets, CHF 185 billion (June 30, 2004)
 In revenues, CHF 36 billion in 2003
 World’s second largest reinsurer overall
– Largest Life & Health reinsurer
– Second largest P&C reinsurer
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Geographical Diversification
Origin of free traded reinsured risks 2003
55%
35%
10%
40%
9%
Swiss Re’s gross premium written by regions 2003
51%
Source: Swiss Re,
Economic Research and
Consulting; Swiss Re
Annual Report 2003
Page 4
Reinsurance - We are at the
end of the risk chain!
 Many of the world‘s risk end up on our balance sheet
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 Monitoring the risk landscape is one of our core activities
Climate Change is in
evidence – observed warming
 Temperature
increase of 0.6°
C – the fastest
rise in 1000
years
 Atmospheric
concentration of
CO2 rising since
1750
sigma No. 1/2004
Natural catastrophes and
man-made disasters in 2003
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If you don’t believe figures, you
may believe pictures
Page 7
1870
Rhone Glacier, Wallis, Switzerland
1999
What does loss data reveal?
Nat Cat losses worldwide 1970-2002 (price level 2003)
100'000
mio USD
80'000
Economic loss
Insured loss
60'000
40'000
20'000
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year
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
0
1970
Swiss Re
Sigma 2003
Extreme weather events
expected to increase in
frequency
Projected changes during the 21st century in extreme climate phenomena
Likelihood
Higher maximum temperatures and more hot days
over nearly all land areas
Very likely
Increased summer continental drying and
associated risk of drought
Likely, over most mid- latitude
continental interiors
More intense precipitation events
Very likely, over many areas
Increase in tropical cyclone peak wind intensities
Likely, over some areas
Increased intensity of mid-latitude storms
Little agreement between
current models
Very likely :
Likely:
90–99% chance
66–90% chance
Source: IPCC Third Assessment Report – Climate change 2001
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Source: Swiss Re, sigma No. 1/2004
What is Swiss Re doing? Working towards solutions
 Research and Development
 Raising Awareness
 Sustainability is a Core Value
 New Products and Services – the facilitation of
GHG emissions reductions
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Research and Development:
Climate change futures
project
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Swiss Re tries to raise
awareness
Long-established
and proven
expertise
Extensive
research and
focused innovation
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
Global warming: element of risk (1994)

Climate research does not remove the
uncertainty – Coping with the risks of
climate change (1998)

Opportunities and risks of climate
change (2002)

Water availability (2002)

The Insurability of Ecological Damage
(2003)

Wind/flood Japan – in search of
sustainability (2003)

Large Dams (2003)

Tackling climate change (2004)
Sustainability is a core value
 Executive Board “Top Topic”
 Reflected in:
– Our buildings and operations
– Our interaction with government/regulators
– Events – this is our 4th GHG event in Ruschlikon
 Reducing our own environmental footprint
– ‘’Greenhouse Neutral” Swiss Re Pledge
- 10 years
- 15% internal emissions reductions;
- 85% offset via the World Bank Community Development
Carbon Fund (CDCF) which supports projects in least
developed countries
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New products and services:
Swiss Re and the GHG emissions
market
 Greenhouse Gas Risk Solutions
 Developing financial tools to mitigate/hedge market and
performance risks
–Third Party Asset Management/investment related solutions
–Renewable/alternative energy (reinsurance/structured finance
-wind, geothermal etc.
–Clearing and delivery guaranty insurance
 Evolutionary: Development ecosystem services markets
–Footprint neutral products – consumer/company offsets
- Collaborative effort with the UNDP, The Nature Conservancy and
Conservation International to be launched in January 05
 GHG Emissions reductions market development
–Risk assessment and management
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Linking Climate Change to
corporate governance
 Climate as a corporate board risk management issue
– Preparation for the impacts of climate change?
– Reporting - “material events and uncertainties”; Sarbanes-Oxley
– Carbon Disclosure Project (institutional investors representing ca. USD
$9 trillion in assets) In 2003:
-
80% Global 500 CEOs acknowledge risk; 35-40% acting
– Shareholder resolutions
-
In 2003 - 32% at Chevron, 22% at Exxon, 27% at AEP etc.
-
For 2004; >25 in energy, utilities, automotive sector as well as the
insurance industry
 Implications for D&O insurance
– Non-action potentially affects shareholder value
– Swiss Re policy (upon policy renewal):
1. Check response of company to CDP;
2. If inadequate/non-responsive – send questionnaire
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– Goals: Raising awareness and evaluation of underwriting exposure