Rethinking Risk in a
Changing Climate
Megan E. Linkin, Ph.D., CCM
Natural Hazards Expert, Swiss Re Global Partnerships
Sandy: One Year Later
Monmouth University, October 29, 2013
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 2
Economic and Insured Losses1980 - 2012
Source: Swiss Re Economic Research and Consulting
Increasing trend in magnitude of annual losses Larger proportion of losses are uninsured
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 3
Planning for Climate Change using a Risk Management Framework
Modeling expertise
The Economics of Climate Adaptation Methodology
Innovative Alternative Risk Transfer Solutions
Education and consultation services
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 4
Planning for Climate Change using a Risk Management Framework
Modeling expertise
The Economics of Climate Adaptation Methodology
Innovative Alternative Risk Transfer Solutions
Education and consultation services
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013
Swiss Re's proprietary model considers four elements that determine a Cat loss
What exactly is covered ... where... and how?
Hazard VulnerabilityValue
distributionCover
conditions
Sums insured Cover limits Deductibles Exclusions etc.
ExampleHurricane “Charley”Aug 2004
How often / how strong?
How well built and protected?
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 6
Planning for Climate Change using a Risk Management Framework
Modeling expertise
The Economics of Climate Adaptation Methodology
Innovative Alternative Risk Transfer Solutions
Education and consultation services
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 7
December 2012: Mayor Michael Bloomberg launches the Special Initiative on Rebuilding and Resilience (SIRR) to develop a comprehensive plan to protect the city of New York from future storms.
Swiss Re and McKinsey have a proven track record in assessing damage, evaluating natural hazard risk and identifying and quantifying the costs and benefits of adaptation measures in more than 20 countries and regions around the world dating back to 2008.
Using information about infrastructure, building stock and mitigation and adaptation measures from the City, Swiss Re and McKinsey performed economic loss potential analysis for current and future climate scenarios with and without adaptation/mitigation strategies.
The Economics of Climate AdaptationCase Study: New York City
Source: The City of New York
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 8
Planning for Climate Change using a Risk Management Framework
Modeling expertise
The Economics of Climate Adaptation Methodology
Innovative Alternative Risk Transfer Solutions
Education and consultation services
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 9
Topic Traditional Insurance
Parametric Solutions
Use of Proceeds Intended to cover loss sustained
Used at buyers discretion
Speed of Payment Subject to loss adjustment (can be slow)
Rapid: 2 – 6 weeks
Loss Adjustment / Administrative Process
Yes - buyer may need own claims adjusters
No – little claims administration needed
Transparency Loss settlement is complex to explain
Parametric triggers easier to explain
Pricing Flexibility Limited modifications Structure can be adjusted to price
Changes in Exposure Annual adjustments No adjustment needed
Traditional vs. Parametric –Benefits to buyer
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 10
How do Parametric solutions work:MultiCat Mexico hurricane example
Trigger: Hurricane of 920 mb or
lower through box = payment
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 11
Planning for Climate Change using a Risk Management Framework
Modeling expertise
The Economics of Climate Adaptation Methodology
Innovative Alternative Risk Transfer Solutions
Education and consultation services
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 12
Founding sponsor of Climate Week NYC
Mind the Risk report
– Calculated affected population and lost economic productivity for 616 metropolitan areas globally.
– NYC/Newark metro region: Ranked #1 in potentially affected storm surge population in US
100 Resilient Cities Challenge
– Support at least 100 cities in the next three years to appoint Chief Resilience Officers (CRO), create resilience strategies, and establish a CRO support network to share information and best practices.
Knowledge SharingIncreasing Climate Resiliency
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 13
Web-based hazard mapping tool
Real time information regarding impending and on-going events.
Post event footprints.
Swiss Re Global Flood Zones.
Expertise for our clientsCatNet
Source: ©GfK GeoMarketing Map Edition World, Swiss Re GEOservices
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 14
Web-based hazard mapping tool
Real time information regarding impending and on-going events.
Post event footprints.
Swiss Re Global Flood Zones.
Expertise for our clientsCatNet
Source: ©GfK GeoMarketing Map Edition World, Swiss Re GEOservices
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 15
Web-based hazard mapping tool
Real time information regarding impending and on-going events.
Post event footprints.
Swiss Re Global Flood Zones.
Expertise for our clientsCatNet
Source: ©GfK GeoMarketing Map Edition World, Swiss Re GEOservices
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 16
Web-based hazard mapping tool
Real time information regarding impending and on-going events.
Post event footprints.
Swiss Re Global Flood Zones.
Expertise for our clientsCatNet
Source: ©GfK GeoMarketing Map Edition World, Swiss Re GEOservices
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 17
Web-based hazard mapping tool
Real time information regarding impending and on-going events.
Post event footprints.
Swiss Re Global Flood Zones.
Expertise for our clientsCatNet
Source: ©GfK GeoMarketing Map Edition World, Swiss Re GEOservices
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 18
Managing climate change and its impacts will require innovative, multi-disciplinary approaches.
Insurance is a vital component when considering a holistic, comprehensive approach to climate change related disaster risk financing.
Understanding climate change is of paramount importance to the insurance industry.
Academia, the public sector and private citizens can and should tap into the wealth of risk management knowledge provided by the insurance industry.
Concluding Thoughts
Thank you
M. Linkin, Swiss Re | Sandy: One Year Later | Monmouth Univ., Oct. 29, 2013 20
Legal notice
©2013 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivatives of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re.
Although all the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial and/or consequential loss relating to this presentation.