Download view presentation slides - Southeast Florida Regional Climate

Climate Change and resilience
building: a reinsurer's
perspective
Southeast Florida Regional Climate Leadership Summit
The cos t of dis as te rs is wide ning along with the gap
betwe e n unins ure d and ins ure d los se s
Global natural catastrophe losse s, 197 0 -2 013 (in USD bn)
450
400
350
300
250
200
150
100
50
0
1970
1975
Insured losses
1980
1985
Uninsured losses
1990
1995
2000
10 per. Mov. Avg. (Total Insured Losses)
2005
2010
10 per. Mov. Avg. (Total Eco Losses)
Source : Swis s Re sigma 1 / 2 0 1 4
Alex Kaplan | Global Partnerships | October 2, 2014
2
Climate change is not the main drive r for ris ing natural
catas trophe los se s in re ce nt de cade s
Oce an Drive , FL, 19 2 6
Oce an Drive , FL, 2 013
Drive rs
Growth of we alth
Conce ntration of value s in
expose d are as (e .g. coasts)
Incre asing vulne rability
Climate change as a pote ntial
new drive r in future (storms,
floods, droughts)
Alex Kaplan | Global Partnerships | October 2, 2014
3
Swis s Re 's climate change s trate gy
Coping with climate change re quire s both mitigation and adaptation me asure s
Swis s Re as se s se s and manage s the ris k
 Advance (our) knowledge about
climate change ris k
 Quantify climate change ris k
 Integrate climate change ris k into
underwriting and ris k management
framework
Swis s Re influe nce s the bus ine s s e nvironme nt
Swis s Re se ize s bus ine s s opportunitie s
 Develop appropriate s olutions for
adapting to and mitigating climate
change
 Traditional catas trophe ins urance
 Weather ris k s olutions
Swis s Re le ads by example
 Rais e awarenes s , actively disseminate
knowledge to all s takeholders and
advocate a long-term, marked-bas ed
policy framework, through
 Greenhous e neutral s ince October
2003
 Publications , platforms (e.g. World
Economic Forum), Centre for Global
Dialogue, s peaking engagements
 COYou2 Programme s ince 2 0 0 6
 Reduced emissions per employee by
5 4 .4 % by 2 0 1 3
Alex Kaplan | Global Partnerships | October 2, 2014
4
Climate-resilient development needs to
assess and address total climate risk
Objectives

Provide decision makers with the facts and methods necessary to design and execute
a climate adaptation strategy
 Supply insurers, financial institutions, and potential funders with the information
required to unlock risk prevention funding and deepen global risk transfer markets
Methodology
Follow a rigorous risk management approach to assess local total climate
risk, the sum of
• today’s climate risk,
• the economic development paths that might put greater population
and value at risk
• the additional risks presented by climate change
2 ) Propose and prioritize a basket of adaptation measures to address total
climate risk on an economic basis
1)
Alex Kaplan | Global Partnerships | October 2, 2014
5
The working group studied 18
regions with diverse climate hazards
Economics of Climate Adaptation (ECA) Working Group, a partnership between the Global Environment Facility, McKinsey & Company,
Alex Kaplan | Global
Partnerships
| October
2, 2014
6
Swiss Re, the Rockefeller Foundation, ClimateWorks Foundation, the European Commission,
and Standard
Chartered
Bank.
South Florida Case Study:
Focus on Risk from Hurricane s
Hurricane
Andrew
Alex Kaplan | Global Partnerships | October 2, 2014
Re s ult: Expe cte d los se s by s ce narios and by hazard
Example Florida
Annual expected loss in 2008 and 2030
$ Billions, 2008 dollars
33
30
26
2
2
1
Rain
Storm
surge
12
11
17
10
1
6
Wind
Scenarios
Percent of 3
Counties1 GDP
2008
Today’s
Climate
8.5
2030
Today’s
Climate
8.4
2030
Moderate
change
9.4
2030
High change
10.1
1 2008 Moody’s
SOURCE: Swiss Re; team analysis
Alex Kaplan | Global Partnerships | October 2, 2014
8
Se a leve l rise and alte re d hurricane fre que ncie s
s ignificantly incre ase los se s in New York City
Expected annual losses
from storm surge and wind
(billion USD)
+ 70%
+ 168%
+ 88%
Source: www.nyc.gov: A Stronger More Resilient New York
Alex Kaplan | Global Partnerships | October 2, 2014
Re s ults
Annual Expe cte d Los s by ZIP code
Source: A Stronger, More Res ilient New York
• Curre nt drive rs of loss: e ast and south shore s of State n Island, southe rn Brooklyn and
Que e ns, Brooklyn and Que e ns wate rfront and southe rn Manhattan.
• Unde r future sce narios: Same ge ographic re gions, plus northe rn Que e ns and the
Bronx
• Unde r 2 0 5 0 s sce nario: 4 0 0 % incre ase in ZIP code s which have an AEL of USD 3 0
million
Alex Kaplan | Global Partnerships | October 2, 2014
10
A re s ilie nce (adaptation) cos t curve
Alex Kaplan | Global Partnerships | October 2, 2014
Locally s pe cific adaptation cos t / be ne fit curve
Cost/benefit
11
10.26
10
9
8
7.54
6.93
~40% of total
expected loss can
be averted costeffectively
7
6
5
Measures below
this line have net
economic benefits
4
3
3.70
1.75 2.56 2.96
2
1
0
0
0
0.02 0.03
0
1
2
3
Beach
Nourishment
(50 ft)
Roof cover,
new
Beach
Nourishment
(100 ft)
Roof truss,
new
4
0.03
5
6
7
8
9
Levee & Floodwall
Sandbags
Opening
protection, new Roof shape
new
Roof deck
Temp.
attachment, new
floodwalls
Vegetation
Mgmt
Example Florida
$30 billion
Annual
expected
loss
1.54
1.54 2.15
1.47
0.93 0.99 1.09
1.54
0.35
1.30
0.80
0.08
0.98 1.01
0.13 0.69
0.05
0.04 0.08
Averted loss
$ Billions
Calculated in 2008 dollars for the average climate scenario
Elevation –
new homes
10
11
Roof
cover,
retrofit
Targeting
hardening,
dist.
Roof truss,
retrofit
Substation
Backup
generators
Local
levees
12
13
14
Masonry,
new
Opening
protection,
retrofit
15
16
17
18
19
Elevation, retrofit
Replacement undergrounding, trans.
Targeted undergrounding, trans.
Targeted
Top
layer risk transfer
hardening,
Elevation, prioritized
transmission
retrofit
Deductibles Replacement
residential
undergrounding, dist.
Targeted undergrounding,
Deductibles distribution
commercial
Road elevation
Engineering based FRT penetration
Alex Kaplan | Global Partnerships | October 2, 2014
12
Climate ris k is be s t tackle d with a portfolio of adaptation
me as ure s
High
List of potential measures to reduce
hurricane damage
1 Sand bags
2 Opening/ mas onry
3 Temporary floodwall
4 Levee and floodwall
Severity of hazard
5 Targeted hardening (utilities )
6 Home elevation
7 Local levees
8 Road elevation
9 Roof (various )
1 0 Beach nouris hment
1 1 Vegetation management
1 2 Financial ris k trans fer
1 3 Undergrounding (utilities )
1 4 Subs tation backup
Low
<=Once every
5 0 years
Once every
1 0 -2 5 years
Frequency of hazard
Once every 1 0 or
fewer years
Example Florida
Source : Te am analys is
Alex Kaplan | Global Partnerships | October 2, 2014
13
Global ove rview:
Expe cte d los s ave rte d by adaptation me as ure s
Alex Kaplan | Global Partnerships | October 2, 2014
14
The Road Ahead:
Closing the protection gap
Closing the Gap: Including ex-ante
ins trume nts into the ove rall ris k financing
s trate gy
Ex-ante risk financing
Private
Citize ns /
Individuals
(Re-)insurance
policies
Corporations /
Comme rcial
Ente rprise s
(Re-)insurance
policies
Gove rnme nt’s
expos ure
(s tate budget)
Reserve funds,
parametric
reinsurance,
catastrophe bonds

Smaller gap
between
economic and
insured losses
 Reduced financial
burden for the
government after
an event
 Less volatility for
the state budget
and more planning
certainty
Ex-post financing
De bt
financing
Budget
re allocation
Donor
as s is tance
Tax incre ase s
Othe rs
Including ex-ante instruments in the overall risk financing mix helps a government
to lower its financial exposure to catastrophic risks, natural and man-made.
Alex Kaplan | Global Partnerships | October 2, 2014
Case s tudy Caribbe an: Caribbe an Catas trophe Ris k
Ins urance Facility (CCRIF)
Solution features
 The CCRIF offe rs parametric hurricane and e arthquake ins urance
policie s to 16 CARICOM gove rnme nts
 The policie s provide imme diate liquidity to participating
gove rnme nts whe n affe cte d by eve nts with a probability of 1 in 15
ye ars or ove r
 Me mbe r gove rnme nts choose how much cove rage they ne e d up
to an aggre gate limit of USD 10 0 million
 The me chanis m will be trigge re d by the inte ns ity of the eve nt
(mode lle d los s trigge rs )
 The facility re s ponde d to eve nts and made payme nts :
– Dominica & St. Lucia afte r e arthquake (2 0 07 )
– Turks & Caicos afte r Hurricane Ike (2 0 0 8 )
– Haiti , Barbados , St. Lucia, Anguilla and St. Vince nt (2 010 )
Involved parties
 Re ins ure rs : Swis s Re and othe r ove rse as re ins ure rs
 Re ins urance program place d by Guy Carpe nte r
 De rivative place d by World Bank Tre as ury
Swis s Re Global Partne rs hips | J anuary 2 0 1 3
Alex Kaplan | Global Partnerships | October 2, 2014
17
Case s tudy Uruguay: Large s t Ene rgy Ris k Trans fe r to
Prote ct Agains t Drought Ris k
Solution features
• Insure d pe ril: Drought
• Payme nts to be use d to purchase e ne rgy from alte rnative
source s whe n drought conditions cause lack of hydro powe r
• De rivative contract: betwe e n UTE, Uruguayan state -owne d
hydro-e le ctric powe r company, and World Bank Tre asury.
Risk is the n place d in the market
• Payme nt me chanics:
– Trigge r: Leve l of rainfall monitore d at we athe r stations
– Settle me nt: Market price of bre nt crude oil
• Time horizon: J anuary 2 014 – J uly 2 015
• Transaction Size: USD 4 5 0 million
• Large st of it's kind in the we athe r risk manage me nt market
Involved parties
• Clie nt: UTE (Uruguayan state -owned powe r company)
• Arrange r: World Bank Tre asury
• Risk Take rs: Swiss Re and Allianz
Alex Kaplan | Global Partnerships | October 2, 2014
18
Case s tudy Unite d State s :
Alabama – Firs t parametric cove r for a
gove rnme nt in an indus trialize d country
Solution features
• Insure d pe ril: Hurricane
• Payme nts to offset e conomic costs of hurricane s
• Trigge r type : Disaste r occurring within a de fine d ge ographic
are a ("box") along coast (“cat-in-the-box”)
• Trigge r base d on wind spe e d of hurricane eye as it passe s
through pre -dete rmined box
• Payout in as little as two we e ks
• Time horizon: J uly 2 010 – J uly 2 013
• First parametric catastrophe risk transfe r for a gove rnme nt in
an industrialize d country
Involved parties
• Insure d: State Insurance Fund of Alabama
• Swiss Re : Le ad structure r and sole unde rwrite r
19
Alex Kaplan | Global Partnerships | October 2, 2014
19
Case s tudy:
Miami Dade County Public Schools –
Cus tom multi-ye ar s tructure d cove r
Solution features
 Insure d pe ril: Name d Windstorm and associate d flood

Multi-ye ar structure d cove r: USD 10 0 m

Cove ring inde mnifie d losse s from NWS to softe n impact to
broade r school syste m
–
3 ye ar cove rage with unlimite d re instate me nts
–
Te rm Aggre gate De ductible
–
Fixe d pre mium ove r te rm
–
No claims bonus

Time horizon: May 2 013 – May 2 016

Customize d multi-ye ar structure d risk transfe r for major
school district
Involved parties

Insure d: Miami-Dade County Public Schools

Swiss Re : Le ad structure r and sole unde rwrite r

Broke r: AJ Gallaghe r
20
Alex Kaplan | Global Partnerships | October 2, 2014
Alex Kaplan | Global Partnerships | October 2, 2014
21
Legal notice
©2014 Swiss Re. All rights reserved. You are not permitted to create any modifications
or derivative works of this presentation or to use it for commercial or other public purposes
without the prior written permission of Swiss Re.
The information and opinions contained in the presentation are provided as at the date of
the presentation and are subject to change without notice. Although the information used
was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy
or comprehensiveness of the details given. All liability for the accuracy and completeness
thereof or for any damage or loss resulting from the use of the information contained in this
presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group
companies be liable for any financial or consequential loss relating to this presentation.
Alex Kaplan | Global Partnerships | October 2, 2014
22