Swiss Re has invested in data and technology after an escalation in wildfire losses and says the peril is “clearly insurable,” but now makes up less of its underwriting portfolio. 

Swiss Re now works with satellite imagery to track wildfires closely.  

"We've invested quite a bit into data and understanding the wildfire risk since there were numerous wildfires all around the world, particularly in California in 2017 and 2018. That triggered a model update,” Chief Underwriting Officer P&C Re Gianfranco Lot told a media briefing last week. 

"The result of it is that – not from an appetite point of view but just by moving away from frequency scenarios – we have less of that wildfire risk in our portfolio than before,” he said.  

Natural catastrophe insured losses have grown by 5–7% a year over the past 30 years, reaching $US125 billion ($181.65 billion) last year.  

A further $US150 billion losses were not protected, and Swiss Re says this protection gap is growing, driven by increasing frequency of climate-related natural catastrophe events such as droughts, floods and wildfires, and wealth accumulation in risk-prone areas near the coast or wild forests.  

“Closing this gap is both an opportunity for insurers to grow and an important part of increasing global financial resilience,” it said. "With the clear trend to a hardening market for natural catastrophe risks, Swiss Re is well placed to grow, while achieving sufficient returns.” 

Noting the departure of some insurers from California, Mr Lot said Swiss Re uses technology “to allow us to underwrite that risk better” after 2018’s Camp Fire in California, which was the costliest single natural disaster in the world for insurers that year. 

“It's still difficult to assess but it's clearly insurable and it should be insurable going forward. It forms part of our nat cat portfolio going forward,” he said. 

Swiss Re says inflation, natural catastrophes and covid have encouraged higher insurance demand to manage rising uncertainty and volatility, and the complex environment presents opportunities.  

It expects the global non-life reinsurance market to grow by 3.2% annually until 2025. 

In April, Swiss Re split its reinsurance business into Property & Casualty Reinsurance led by Urs Baertschi, and Life & Health Reinsurance led by Paul Murray.  

"We remain committed to the natural catastrophe market. It is a very promising business – if you understand the risk and have the trust of your clients,” Mr Baertschi said. 

Mr Murray says the global L&H market will recover this year but stay below the historical trend, with challenges including an “eventual economic slowdown”. 

Covid mortality claims cost Swiss Re $US3.5 billion ($5.09 billion) in the past three years. 

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