In­sur­ers shoul­der risks for the ben­e­fit of so­ci­ety

Anthropogenic climate change is evident in many extreme weather and climate events occurring across the world. This is borne out by the Sixth Assessment Report published in summer 2021 by the Intergovernmental Panel on Climate Change (IPCC), which compiles key global climate information.

The findings reveal that the surface temperature of the planet has risen by 1.09°C since the 1850–1900 period, with increases over land even higher, at 1.59°C. Globally averaged precipitation over land has increased in this period, too. Heavy precipitation has also become more frequent and intense over most land areas. We are also seeing more frequent droughts and heatwaves.

The report shows that we are likely to experience more extreme weather events with every further rise in global temperatures. It states that additional global warming will also increase the frequency of some extreme events on a scale never before recorded in the observational data.

In every climate scenario explored, it can be assumed that most regions will experience more frequent and more intense heavy rainfall in the future. Urban areas in particular are expected to record more extreme heat events. From a scientific perspective, CO2 emissions need to be limited to restrict human-induced global warming. They should be reduced to at least net zero alongside a sharp decrease in other greenhouse gases.

Climate change in Switzerland

As an Alpine country, Switzerland will be particularly hard hit by climate change and the risks that it brings. The Swiss Federal Office for the Environment outlines these climate impacts in its report ‘Climate change in Switzerland’. The average annual temperature in Switzerland has risen by 2°C since 1864. Heavy rainfall is now 12 per cent more intense and 30 per cent more frequent than in 1901. This makes the occurrence of uncontrolled surface runoff, floods, debris flows and landslides more likely, along with the damage to property that these inflict.

Private insurers and cantonal buildings insurers estimate that the country’s 2021 summer storms caused insured losses of around CHF 2 billion. This is the largest loss event for private insurers, which bear around half of these costs, since the floods in 2005. The total loss amount is on a similar scale. Beyond buildings and contents insurance, there also were many motor vehicle insurance claims caused by the heavy hail.

Measures to protect against extreme natural disasters need to be taken to prepare for climate-related risks. Annual claim costs are not currently rising as fast as the population, built areas and material assets. This is probably down to the effectiveness of the precautionary measures taken, which proved successful during the intense summer storms in 2021.

Natural hazards insurance

Hail, storms and floods caused enormous damage in several regions of Switzerland in June and July 2021. Some areas, such as Wolhusen in Lucerne, saw whole neighbourhoods ravaged by hail, while others were more affected by flooding after rivers broke their banks.

Flood protection measures that have been in place since 2005 ensured that the damage was not more extensive. While built structures channelled and captured lake and river water, elsewhere portable flood defences prevented the situation from becoming more serious. Ensuring good communications and managing emergency services efficiently also helped mitigate the situation.

‘The natural hazards pool has worked for decades now thanks to the twofold solidarity principle. We should apply this principle to other major risks.’ 

Michèle Rodoni, CEO, Die Mobiliar

With insurance coverage for natural hazards well over 90 per cent, Switzerland is very well-equipped to cope with the financial implications of extreme weather events. The Swiss insurance pooling solution for natural hazards once again proved effective in the country’s heavy storms of last summer. It shows that the federal government, the cantons and the Swiss private insurance industry are putting the right plans in place to tackle the impacts of climate change as effectively as possible.

Time-proven Dual Insurance System

Unlike in neighbouring countries, such as Germany, damage caused by natural hazards is almost fully covered in Switzerland. Switzerland has a dual insurance system here, in which cantonal buildings insurance covers buildings in 19 cantons, while private insurers cover those in the remaining seven. Practically all contents and motor vehicle insurance policies are with private insurers. Insurance is to a large extent mandatory, which ensures that as many people as possible are protected and keeps premiums affordable. The solidarity principle is key: The premium is the same for all buildings covered by private insurance, regardless of the risk situation.

There is also solidarity between private insurance companies, with the claims burden shared across insurers with the natural hazards pool. Acceptance of the twofold solidarity concept is due to a high level of risk awareness formed following painful experiences of major disasters, such as the ‘Winter of Terror’ which brough avalanches in 1950/51. The successful natural hazards insurance model shows that joint solutions by the state and the insurance industry can work, and the Swiss model is so effective that it is repeatedly held up as an example for other countries.