Swiss Re’s 2020 SONAR report highlights pandemic-related emerging risks

Current COVID-19 crisis must not overshadow need to move to low-carbon future: Swiss Re 2020 SONAR report

• Intergenerational tensions, supply chain disruptions and the fragility of public healthcare are among the risks and trends amplified by the COVID-19 pandemic
• The coronavirus outbreak showed that societies weren’t sufficiently prepared, and that broad risk awareness is crucial for proper risk management; SONAR contributes by flagging emerging risks and fostering dialogue
• The current crisis shouldn’t overshadow the need for the world to transition to a more sustainable economy and a low-carbon future, and the insurance industry can play a pivotal role in this
• The report discusses new and changing risks in the context of long-term macro trends and turbulent times; specific topics highlighted include increased cyber risk from so-called edge computing, the boom of e-cigarettes and the lack of long-term experience with new and more sustainable building materials

Zurich, Switzerland (June 4, 2020) – New risks and trends accentuated by the COVID-19 pandemic are emerging, but the current crisis shouldn’t overshadow the need for the world to transition to a more sustainable economy and a low-carbon future, according to the latest SONAR report from Swiss Re Institute.

The recession caused by the containment measures to curb the coronavirus outbreak is exacerbating longer-term structural problems, such as an increased pressure on intergenerational social contracts and disruptions to supply chains. While older generations turned out to be more vulnerable in the pandemic, millennials struggle with high unemployment and debt from education spending – putting to test the solidarity between generations. Measures such as the widespread lockdowns are causing drug shortages among other supply chain problems, and at the same time, the COVID-19 crisis is exposing the fragility of many of the world’s public health systems and the need for better risk management.

The 2020 SONAR report, published today, aims to inspire risk dialogue and foster risk awareness within society and the insurance industry, a key step for adequate risk management.

“After this global crisis, which shows the importance of forward-looking risk management, society will need to adapt to many changes, some of which will continue to linger on,“ said Patrick Raaflaub, Swiss Re’s Group Chief Risk Officer. “As a risk knowledge company, it is our duty to raise awareness about new risks we pick up on the horizon and to continue to build resilience also in these unprecedented times.“

The pandemic experience will continue to prompt shifts in the political landscape, regulatory environment and in market dynamics, the SONAR report said. It will also bring about a refocus in priorities, as the world moves toward planning its economic recovery.

A more sustainable future post COVID-19

The COVID-19 containment measures and lockdowns may have eased pollution for a brief moment, but they will not put a halt to global warming, the report said. Therefore, the transition to a net-zero economy, where sustainability is firmly embedded in economic recovery strategies, is key.

Once the world moves out of crisis stage and toward some form of post-pandemic norm, the public and private sectors must focus on both global health and climate change, the SONAR report said. A transition to a low carbon economy presents many opportunities, but also new risks for the insurance industry, including from carbon removal schemes.

The road map to net-zero

As a starting point, all sectors of the economy need to limit and reduce emissions as much as possible, in particular the transport, agriculture and building industries. Greenhouse gases that remain need to be removed from the atmosphere through biological or technical means and then be permanently stored.

According to most climate models, lower greenhouse gas (GHG) emissions together with decisive carbon removal are needed to limit global warming to well below 2°C from pre-industrial levels. To reach that target, the carbon removal industry would need to grow to the size of the current oil & gas industry by 2050. While the carbon removal industry is still in its infancy and its scalability is yet to be proven, the estimated growth would bring a wealth of opportunities for insurance.

The transition to a low-carbon economy requires political, technological and behavioral change. Finding new ways to cope with the required changes calls for innovation and offers new opportunities for business across different sectors, and in all core areas of insurance, including in risk knowledge and risk transfer as well as investment. The insurance industry can play a pivotal role by providing specialist risk transfer knowledge and capacity to partners in other sectors of the economy.

About the SONAR report

Our SONAR report informs and inspires conversations about emerging risks, so the re/insurance industry can continue to build resilience also in turbulent times.

Read the Swiss Re SONAR 2020 report here: SONAR 2019: New emerging risk insights

Video Overview

Please visit https://youtu.be/LWuBEMe4VgA if the embedded video player doesn’t work.

About Swiss Re

The Swiss Re Group is one of the world’s leading providers of reinsurance, insurance and other forms of insurance-based risk transfer, working to make the world more resilient. It anticipates and manages risk – from natural catastrophes to climate change, from ageing populations to cyber crime. The aim of the Swiss Re Group is to enable society to thrive and progress, creating new opportunities and solutions for its clients. Headquartered in Zurich, Switzerland, where it was founded in 1863, the Swiss Re Group operates through a network of around 80 offices globally. It is organised into three Business Units, each with a distinct strategy and set of objectives contributing to the Group’s overall mission. For more information, please visit www.swissre.com.

Forward-Looking Statements

Certain statements and illustrations contained herein are forward-looking. These statements (including as to plans, objectives, targets, and trends) and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact.

Forward-looking statements typically are identified by words or phrases such as “anticipate”, “assume”, “believe”, “continue”, “estimate”, “expect”, “foresee”, “intend”, “may increase”, “may fluctuate” and similar expressions, or by future or conditional verbs such as “will”, “should”, “would” and “could”. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the Group’s actual results of operations, financial condition, solvency ratios, capital or liquidity positions or prospects to be materially different from any future results of operations, financial condition, solvency ratios, capital or liquidity positions or prospects expressed or implied by such statements or cause Swiss Re to not achieve its published targets.

Such factors include, among others: the frequency, severity and development of insured claim events, particularly natural catastrophes, man-made disasters, pandemics, acts of terrorism and acts of war; mortality, morbidity and longevity experience; the cyclicality of the insurance and reinsurance sectors; instability affecting the global financial system; deterioration in global economic conditions; the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on the Group’s investment assets; changes in the Group’s investment result as a result of changes in the Group’s investment policy or the changed composition of the Group’s investment assets, and the impact of the timing of any such changes relative to changes in market conditions; the Group’s ability to maintain sufficient liquidity and access to capital markets, including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls due to actual or perceived deterioration of the Group’s financial strength or otherwise; any inability to realise amounts on sales of securities on the Group’s balance sheet equivalent to their values recorded for accounting purposes; changes in legislation and regulation, and the interpretations thereof by regulators and courts, affecting us or the Group’s ceding companies, including as a result of shifts away from multilateral approaches to regulation of global operations; the outcome of tax audits, the ability to realise tax loss carryforwards, the ability to realise deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings, and the overall impact of changes in tax regimes on business models; failure of the Group’s hedging arrangements to be effective; the lowering or loss of one of the financial strength or other ratings of one or more Swiss Re companies, and developments adversely affecting the Group’s ability to achieve improved ratings; uncertainties in estimating reserves; policy renewal and lapse rates; uncertainties in estimating future claims for purposes of financial reporting, particularly with respect to large natural catastrophes and certain large man-made losses, as significant uncertainties may be involved in estimating losses from such events and preliminary estimates may be subject to change as new information becomes available; extraordinary events affecting the Group’s clients and other counterparties, such as bankruptcies, liquidations and other credit-related events; legal actions or regulatory investigations or actions, including those in respect of industry requirements or business conduct rules of general applicability; changes in accounting standards; significant investments, acquisitions or dispositions, and any delays, unexpected costs, lower-than expected benefits, or other issues experienced in connection with any such transactions; changing levels of competition, including from new entrants into the market; and operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks and the ability to manage cybersecurity risks.

These factors are not exhaustive. The Group operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

This communication is not intended to be a recommendation to buy, sell or hold securities and does not constitute an offer for the sale of, or the solicitation of an offer to buy, securities in any jurisdiction, including the United States. Any such offer will only be made by means of a prospectus or offering memorandum, and in compliance with applicable securities laws.

SOURCE: Swiss Re

Tags: climate change, coronavirus, emerging risks, epidemic, outlook / predictions, Swiss Re, trends
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