Swiss Re’s Mitchell on pruning the portfolio to tackle climate change

Global (re)insurers have an opportunity to step up and provide the solutions needed to spur the development of climate-related technology and protect clients against the new perils associated with the changing climate, according to Mike Mitchell, head of property and specialty underwriting, reinsurance at Swiss Re.

Speaking to The Insurer TV, Mitchell said climate change has a “massive impact” on the decisions that Swiss Re is making from an underwriting perspective, adding that in some cases, the reinsurer is working to reposition its portfolio away from perils such as wildfires. 

He said the portfolio pruning has been prompted by a “dramatic shift” in loss experience from better modelled perils which are not as susceptible to climate risks – such as earthquakes and hurricanes – to more “immediately climate-sensitive perils”, such as floods, hail and wildfire.

“These [better modelled perils] used to represent ~80 percent of the loss that Swiss Re saw on an insured basis but in the last decade or so this has shifted dramatically. Now more than half of the losses that we experience on an insured basis are the result of more climate-sensitive perils,” he explained.

This shift in loss experience has led to a change in the way Swiss Re utilises its models, with an emphasis now placed on the assessment of future loss activity, and also to changes within its property and specialty portfolio so that “we feel that we have a confident view of the risk”, he added.

“When we’re thinking about pricing risk from a climate risk perspective, we’re taking into consideration what we perceive as being both the climate risk cycle but also the longer-term trends,” he said.

Part of this process has been to reassess the liabilities it underwrites by identifying the carbon footprint and climate-exposure of its clients. He said clients are increasingly receptive to the advice and risk mitigation services offered by Swiss Re and are now more willing to engage in conversations about the climate impact of operations and what that may mean for their risk profile.

“There is more of an openness to have a dialogue to learn what we can do to progress our collective knowledge,” he said. “I have many discussions with key leaders in our client base who are super-interested in trying to understand where they are today, what their peer group is doing, and perhaps what we might anticipate the future to be and also how we might partner.”

He highlighted that there are a number of roles the industry can play when it comes to tackling climate change around using data but also being more active in “external advocacy”, noting that Swiss Re and seven other European (re)insurers have launched a UN-backed alliance that seeks to align investment portfolios and underwriting towards net-zero emissions by 2050.

Commenting on the importance of initiatives such as the Glasgow Financial Alliance for Net Zero, Mitchell said such schemes are “a really important role that we can play as a voice to try and drive the debate forwards”.

Net zero commitments

Speaking on the commitments that Swiss Re has made from an operations point of view, Mitchell said it aims to be net zero by 2030, which involves policy decisions such as reducing the amount of travel and ensuring that the company’s facilities are in an appropriate carbon-neutral space. 

Mitchell said: “The policy that we have recognises that it will never be able to be completely carbon zero in terms of our operations so what we talk about is do our best, and then replace the rest.”

Swiss Re recently signed a deal with Climeworks in the world’s first long-term purchase agreement for direct air capture and storage of carbon dioxide, worth $10mn over 10 years.

Alongside its own goal of 2030, Mitchell said the company has also committed by 2050 that all of its operations will be net zero, including its asset management business. Mitchell noted that “a lot has already been done” on the asset management side with Swiss Re being a founding member of the UN Net-Zero Asset Owner Alliance.