Global warming is making extreme weather events more frequent and intense. The damage they cause also poses new challenges for SMEs and insurers, says Annemarie Büttner, Lead Climate Risk Solutions at Swiss Re.
In 2024, the floods in the Rhone Valley and the Maggia Valley, which cost at least 200 million francs according to initial estimates, were a reminder that natural disasters also affect Switzerland. According to the scenarios developed by the Intergovernmental Panel on Climate Change (IPCC), extreme events such as heat waves and storms are becoming more frequent, causing increasingly serious and costly damage. How can we adapt to these threats? And how to get the right insurance? Annemarie Büttner, Lead Climate Risk Solutions at Swiss Re Corporate Solutions, the industrial insurance arm of the Swiss Re Group, sheds some light on these issues.
To what extent has spending related to natural disasters increased in recent years?
Annemarie Büttner: Globally, we have seen an upward trend in natural disaster-related losses of 5% to 7% per year since the mid-2010s. Our country’s climate is warming twice as fast as the global average and is already at plus 2.6°C compared to the pre-industrial climate. Switzerland is one of the ten European countries most exposed to natural hazards, such as floods, winter storms and severe thunderstorms.
In addition, heat waves, droughts, and forest fires are getting worse, with very concrete consequences for property safety. For example, in July 2021, the intense rains of cyclone "Bernd" (editor’s note: which caused significant material damage in the city of Zurich) caused flash floods, and several rivers and lakes reached critical levels, including in the city.
How do insurance models adapt to this evolution?
Büttner: Today, modelling of natural disasters and their impact is no longer based solely on historical data. We have developed a platform – Risk Data and Services (RDS) – where companies can provide their site contact information to get an assessment of current and future risks based on IPCC’s scientific data. This analysis provides a quantified estimate of losses that can be expected under the climatic conditions of 2030 or 2050, based on different climate scenarios.
Are companies sufficiently anticipating these changes?
Büttner: We encourage companies to take a proactive approach to natural hazards. Many are already doing so, taking the necessary steps to improve their resilience against natural hazards. This can be done through a transfer of risk (traditional insurance) or by strengthening physical protections, such as placing their goods high up to protect them from flooding.
In the long term, insurance premiums will adapt to the increased intensity and probability of natural disasters driven by climate change, i.e. they will rise in many areas. It is important for companies to regularly review whether the deductibles and cover limits are in line with their needs and financial capacities. Extended policy terms are also a way to secure fixed premiums.
Are companies that take protective measures subject to higher premiums?
Büttner: If a company can prove that protective measures have been taken to reduce or prevent natural hazards, this information is taken into account in our models, and the premium should be reduced instead. This helps to counter the expected increase due to the intensification of natural disasters caused by climate change. One example of a protective measure could be the construction of a permanent flood barrier, which would protect the building from flooding.
What role do government measures play in risk management?
Büttner: The Confederation and the cantons are investing heavily in building projects to reduce damage caused by natural hazards. Flood protection measures in the Reuss valley (canton of Uri), the Rhone valley, and the Valais are examples. Thanks to these developments, the risk of flood damage has been significantly reduced over the last twenty years in these regions. The same goes for avalanche protection structures or protection measures against rockfalls, for example. The cantons also regularly update the hazard maps in case of construction changes and are reflected in our natural hazard models.
What practical advice would you give to companies to reduce the risk of natural disasters?
Büttner: The first step is to assess all the natural hazards to which the company is exposed today and in the future, for example, by consulting the hazard maps developed by the cantonal authorities or the Swiss Re RDS platform. The next step is to create a risk mitigation plan. This step involves the use of risk engineers to assess and improve site safety. Solutions include, for example, the installation of flood walls, the regular clearing of water drainage pipes or the preparation of sandbags. These are simple steps that can make a big difference during an extreme weather event.
