We support the development of scalable solutions to mitigate, and adapt to, climate change. This includes offering solutions that support the transition to more sustainable, low-carbon energy systems by managing the risks associated with renewable energy projects and making them more attractive to investors with re/insurance backing.
In 2019, Swiss Re tailored an innovative named windstorm insurance solution for a Green Bank in the US, using a parametric trigger. The Bank financed the installation of more than 14 000 solar panels on residential and commercial rooftops across the state of Connecticut as part of a solar renewable energy credit (SREC) securitisation, which aimed to pool the revenue stream from the produced electricity into an investable security. The Green Bank was concerned about the potential risk of hurricanes causing damage to the rooftop solar panels, interrupting the revenue stream for SREC securitisation investors.
As neither the investors in the SREC securitisation nor the Green Bank own the rooftop solar panels, traditional insurance was not available for this risk. Through our know-how, we were able to develop an alternative parametric solution that satisfied the needs of both investors and the bank, and allowed the SREC securitisation to be brought to the investment market as planned.
For a long time, the inability to effectively underwrite flood risk made private insurers reluctant to offer coverage to homeowners, with many considering the risk “uninsurable”. Thus, approximately 85% of all homeowners in the US are currently without flood insurance. As more severe storms with higher precipitation have led to rising flood losses, this protection gap and its impact on human lives has continued to grow.
Thanks to technological advances around flood mapping and modelling, we have recently been able to improve the accuracy of our flood risk assessments. On this basis, we are now able to provide private insurers with satellite and digital evaluation tools, expanded flood coverage and new policy options. Benefiting from partnering with Swiss Re, a growing number of private insurers are now bringing new flood protection offerings to their customers.
Increasingly, customers of local private insurers can choose to add the new, optional flood and water backup coverage to their existing homeowner policies. The fact that they can get access to comprehensive flood insurance protection through a traditional insurance policy shows that this peril is insurable in the private market. While flood risks are such that no one insurer can solve this challenge alone, our innovative approach and partnerships with local insurers mean that communities can become more resilient and recover more quickly after a storm event.
Earthquakes pose a significant risk in California, and at present most of the losses faced by small and medium-sized businesses would be uninsured. Even if these businesses escape property damage, they risk having to shut down due to power outages, supplier issues or employees not being able to commute to work. Additionally, obligations to continue paying employee wages or lease payments can cause financial difficulties.
In response, Swiss Re and our insurance partners Falls Lake and Arrowhead General Insurance Agency have launched an innovative parametric insurance solution for commercial clients called Quake Assist. The product offers coverage for earthquake-related business interruptions, with fast, simplified claims payments based on the earthquake’s magnitude and the distance of the insured’s location from its epicentre.
Since claims are paid quickly once the parametric trigger conditions are met, business owners face less financial uncertainty and can manage their budgets more effectively. The solution thus enables California’s small and medium-sized businesses, which provide the economic backbone of most communities, to become more resilient, ultimately helping to protect people’s livelihoods and financial security in this earthquake-prone region.
As a growing global population fuels demand for higher crop output, offering protection against loss of, or damage to, crops and livestock is becoming increasingly important. Agricultural insurance thus provides significant benefits to communities, particularly by protecting smallholder farmers’ incomes against such risks.
In the context of significantly reduced state and federal government subsidies for agriculture insurance in Mexico, Swiss Re Corporate Solutions has recently launched, together with a local distribution partner, an agriculture insurance programme to protect small-scale farmers who face being impacted the most by reduced crop yields. Our local distribution partner has been enabled with an internet-based pricing tool that allows them to quickly and efficiently provide farmers insurance quotes as well as issue policies within 24 hours. In 2019, the programme brought agriculture yield insurance to Mexican farmers in the states of Guanajuato (for wheat), Sinaloa (for corn, wheat and beans) and Sonora (for corn and wheat). In parallel, we also prepared insurance distribution for barley crops in the states of Guanajuato, Michoacán, Jalisco and Querétaro. Looking ahead, we plan to broaden the coverage to production in greenhouses as well as livestock.
It is estimated that there are eight million rural farmers in Mexico, who cultivate approximately 22 million hectares of agriculture land. However, agriculture insurance is largely unavailable to many of them. In view of this protection gap, we continue to develop our electronic pricing platform and expand distribution with local partners to ensure that many more smallholder farmers gain access to cover and the opportunity to reinforce their and their communities’ livelihoods.