Climate Change and Switzerland 2050 - OcCC - SCNAT

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Climate Change and Switzerland 2050 | Insurance 141 quently occurring climatologic values. Currently, the volume traded amounts to about 45 billion USD. 6 So far, cat bonds and weather derivatives 3. Claims experience In the past decades, the losses caused by natural hazards have increased worldwide and also in Switzerland. This development is mainly caused by socio-economic changes: 1. Increase in insured assets as a whole and in particular in risk areas. 2. Increased vulnerability of buildings due to construction methods and use of vulnerable materials. 3. Increase in insurance penetration in Switzerland, which was and is already very high for buildings and contents. only cover a small share of the risk in comparison to traditional reinsurance. The available capital on the financial markets is almost unlimited. In Switzerland and worldwide, loss expenses and their variability have increased within the past 20 years. The share of climate change in the increase is largely unknown. billion CHF Source: Swiss Re sigma Catastrophe database 4. Change in expectations of insurees. How large an influence climate change has on the observed increase in losses has not yet been quantified. The global increase in insured losses is represented in figure 1. It is clear that the losses from the largest natural hazards worldwide exceed those in Switzerland many times over. The year 2005 qualifies as the most expensive year for insurances so far; hurricane Katrina caused the largest ever insured loss of 56 billion CHF. This is considerably higher than the former record loss of 35 billion CHF caused by the hurricanes Ivan, 1992: hurricane Andrew CHF 27 billions Figure 1: Global development of insured losses caused by natural catastrophes since 1970. 2005: hurricanes Katrina, Rita, Wilma CHF 81 billions 2004: hurricanes Charley, Frances, Ivan, Jeanne CHF 36 billions 1999: storms Lothar/Martin CHF 12 billions
142 Climate Change and Switzerland 2050 | Insurance Natural hazards in billions of CHF Figure 2: Insured losses in Switzerland (sum of losses of the KGV and private insurance, indexed for 2005). The line shows the 3-year mean. The increase in losses and variability is observable. (Source: VKF loss statistics and SVV; for 2005, only provisional numbers are available) Charley, Frances and Jeanne in the year 2004. The largest insured loss due to a winter storm amounted to 5.9 million CHF (all of Europe) and was caused by Vivian in 1990. The largest insured losses due to flood so far (4.5 billion CHF) were caused by the flooding of the Danube and the Elbe in 2002. In Switzerland, an increase in insured losses due to natural hazards can also be observed (fig. 2). The red line shows the 3-year mean, which flattens the outliers. The general increase as well as the increase in variability are observable. The two most expensive years were 1999 and 2005. The year 2005, with losses of more than 2 billion CHF, was the most expensive year for insurances so far. By far the largest part was caused by the floods in August, which has been the most expensive single event up to now. Insured losses in the year 1999 – caused by the avalanche winter, floods in May, a hail event in July and the winter storm Lothar – amount to about 1.8 billion CHF. Loss potential Much larger loss events are conceivable than the largest natural hazards which the insurance industry has up to now had to deal with. In the insurance industry, the term loss potential refers to the estimated insured loss of very rare, but possible, events. In the insurance industry, this is called the Possible Maximum Loss (PML). In table 2, the largest loss potentials are compiled for Switzerland, Europe and the world. Since these numbers are estimates, the loss potentials in the table only give orders of magnitude. For comparison, the largest loss event that has occurred to date is presented. The table indicates that in Switzerland, an insured loss of 3 billion CHF for each hazard must be anticipated every 200–300 years. This is the statistical mean. It is also possible for such an event to occur twice, one straight after the other. Table 2 shows that the insurance industry within Switzerland but also worldwide has to be prepared for enormous potentials that exceed the largest historic events many times over. It is therefore of great interest whether and how the potentials could change due to climate change. In addition, estimates are usually based on experiences from the past and are therefore only useful to a limited extent for the medium-term future.
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Climate Change and Switzerland 2050 - OcCC - SCNAT

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