The frequency and severity of large natural catastrophe losses has soared in recent years, but a changing climate is not the major cause, Swiss Re says.

The reinsurer told the Federal Government’s flood inquiry today that, while it expects the climate to worsen, other factors such as increased asset values and population changes are the key drivers of rising insured losses, particularly for secondary perils such as floods, bushfires and storms.

Australia and New Zealand CEO Trent Thomson told the hearing a Florida study had shown that over 50 years the frequency of large loss events grew by 450% and severity increased by 1500%.

“At this time, we estimate that climate change is not a major driver of the severity and frequency of the events that we’ve observed,” he said.

“The main driver here is the increased asset values … so when an event happens, the cost of repairing and replacing that home is much greater.

“Also, the increased urbanisation that we’re seeing in the population. So when events do strike, they affect more people at the same time.

“And the third one is migration. It’s where people are choosing to live. And we’ve certainly seen … people moving towards areas which are more prone to secondary perils.”

The comments echo those of Lloyd’s Chief of Markets Patrick Tiernan, as reported by insuranceNEWS.com.au last year.

Mr Thomson told MPs that Swiss Re’s appetite for Australian risks, including flood, is stable. But he noted rate increases of 20% have been the “general trend” in the global reinsurance market for the past two years.

He flagged mitigation investment, improved land use planning and better building standards as critical to assisting with insurance affordability, but warned against relying on intervention such as reinsurance pools.

“Reinsurance pools are an effective premium subsidisation vehicle … but in isolation don’t reduce the risk,” he said. “We have to see a risk pool, or a reinsurance pool, clearly for what it is, and for what it isn’t. And if one is set up, then you have to be very clear around what the objectives are, the expectations, the key performance indicators, and when that risk pool should actually stop.

“Which again puts pressure on ensuring there is risk reduction throughout to make sure that Australia is more resilient. 

“I would always go towards adaptation, resilience, mitigation, because that is what makes the difference in terms of truly managing climate change. Be careful of a risk pool overpromising and underdelivering.”

The House of Representatives Standing Committee on Economics is examining insurers’ responses to the record-breaking floods of 2022, and has already heard from consumer groups, regulators, insurers and reinsurers.

Next month and in May it will visit regions worst affected by the floods, including Brisbane, Lismore, Sydney, the Hawkesbury, Eugowra, Molong, Melbourne, Rochester and Heathcote.