Swiss Re says Australian catastrophe data and urban development patterns show the insurance industry and governments must take action as climate change amplifies exposures from “economic accumulation”.

Head of Property Underwriting for Australia and New Zealand David Sinai says experience in the local market reflects trends highlighted in Swiss Re Sigma global research.

“In that context, governments need to take the recommendations of a number of reports that have found that investment in mitigation is a primary objective,” he told insuranceNEWS.com.au.

“Insurers also need to ensure they are taking account of those emerging loss trends in their pricing, and if we take all of those steps, as the report says, we think we can manage the risk of a changing climate over time.”

Swiss Re’s Sigma report, titled Natural catastrophes in times of economic accumulation and climate change, warns that many catastrophe models are “rooted in the past” and don’t fully account for exposures from rising “value concentration”.

Loss creep, which refers to mounting losses over time, has been visible after major hurricanes and typhoons and is also not always fully reflected in models.

“We believe weather-related risks remain insurable, [but] the time to act is now,” the report says.

“The long-term risk of unmitigated climate change is irreversible ‘tipping points’ and in this scenario, climate change effects could bring the insurability of assets, particularly in regions with high exposure accumulation, into question.”

Mr Sinai says issues in the report are reflected in Australia’s recent bushfire experience, increasing loss potential in areas such as the Gold Coast and normalised loss patterns calculated from historical catastrophe data.

“What we really can’t afford to do is wait 20 years to see what the emerging trends have been and then take account for it,” he said. “This is something we need to get used to as an ongoing change in our business.”

Swiss Re Australia and New Zealand Head Mark Senkevics says that when it comes to government action, the creation this month of Resilience NSW is a positive step.

The agency has a broad mandate extending across crises such as the coronavirus pandemic, bushfires, drought and flood.

“My hope is that other states will establish something similar, and the Federal Government would need to have something as well,” he said. “There is a co-ordinating role that could play through here.”