CASE STUDY: Swiss Re

‘Innovative Protection against Climate Risks’

Relevant Principle: 2.4 Insurance and Reinsurance

Opportunity

Following the extreme weather events of recent years the impetus to understand the financial costs of climate change impacts has increased dramatically. Not only does the insurance industry have an important role to play in disseminating information, it also has a critical opportunity for developing new and varied products that make managing these risks affordable.

Case Study

Using the Economics of Climate Adaptation (ECA) methodology, Swiss Re has developed parametric insurance cover against hurricane damage for the Alabama State Insurance Fund. Under parametric solutions, compensation payable is based on a specified scale (in this case, wind speed of a hurricane) rather than on traditional damage assessments.

Impact

This allows payment to be made quickly to the State of Alabama – within two weeks in the event of a significant hurricane – thereby alleviating the burden of emergency costs which normally falls on the shoulder of governments (and ultimately, taxpayers). The payment can be used for any purpose, including emergency response, reconstruction, replacing lost tax revenue and funding of increased insurance costs.