Physical and regulatory risks and opportunities from a reinsurer`s perspective 18/19 November 2015, Berlin Ernst Rauch Head Corporate Climate Centre
NatCatSERVICE Weather-related loss events worldwide 1980 2014 Number of events Overall and insured losses (US$ bn) Meteorological events (Tropical storm, extratropical storm, convective storm, local storm) Hydrological events (Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) Overall losses (in 2014 values)* Insured losses (in 2014 values)* *Losses adjusted to inflation based on country CPI 2015 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE As at January 2015 2
NatCatSERVICE Weather-related loss events worldwide 1980 2014 By income group - low income groups suffer most 850,000 Fatalities 1 Income Groups defined by World Bank (2014) Overall losses 2 US$ 3,300 bn Insured losses 2 US$ 940 bn 1) Number of fatalities without famine 2) Losses in 2014 values, adjusted to inflation based on individual country CPI. 2015 Münchener Rückversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE As at January 2015 3
Munich Re's activities relating to climate change focus on the following fields of activity RISK ASSESSMENT Detecting and assessing climate change impacts on frequency and intensity of natural hazards RISK TRANSFER SOLUTIONS Realizing business growth areas as a leading provider of risk transfer solutions for renewable energies and climate change-related adaptation products ASSET MANAGEMENT Supporting the expansion of renewable energies and infrastructure projects with our sustainable investment strategy Carbon neutrality of Munich Re Munich: since 2009, reinsurance worldwide: since 2012, Munich Re (Group): end 2015 Initiating flagship projects such as Munich Climate Insurance Initiative (MCII: www.climate-insurance.org) Source: Munich Re (2015) 4
Climate change opportunities by target group Increase planning security, balance sheet protection Investors Technology Public Sector Supporting investors by providing investment security, e.g. via: Helping to commercialise renewable energies, e.g. via: Providing insurance solutions against climate change, e.g. via: Risk transfer solutions, e.g. PV project cover for investors Offshore logistic delay cover Geothermal cover for drilling success / exploration risk PV performance guarantee for manufacturers CSP performance cover for manufacturers Wind serial loss cover for manufacturers and suppliers InsuResilience / Climate Risk Insurance Catastrophe Pools Source: Munich Re (2015) 5
Munich Re investment in infrastructure rational decisions and strategy MR Group synergies: internal engineering and insurance expertise create key advantage with assessment of renewable energy and infrastructure projects Target sectors include energy (energy production, exp. renewables, and distribution), transportation (toll roads, rails, airports, harbours), supply and disposal (eater, sewage, waste), communication (cell towers, mobile networks, satellites) and social infrastructure (hospitals, schools) Aim: diversified portfolio of up to 8 bn with a balanced exposure to specific sectors, geographies and currencies (so far around 1.5 bn already invested) 6
Climate change risk reporting Regulatory activities in the financial sector Insurer Climate Risk Survey NAIC (2015) Providing regulators, shareholders and the public with substantive information about the risks posed by climate change to insurers and the actions insurers are taking in response. Climate Change Adaptation Report PRA / Bank of England (2014) UK Climate Change Act (2008): Prudential Regulation Authority (PRA) has submitted a Climate Change Adaptation Report on the assessment of the impact of climate change on the safety and soundness of PRA-authorised insurance companies. 2 Investing Initiative French Energy Transition Law and Article 173 (2015) July 2015: the French National Assembly adopted the Energy Transition Law, aimed at reducing French GHG emission and increasing renewable energy use. The law also contains an article, aimed at the disclosure of climate risks of institutional investors and listed companies in France. Source: Munich Re (2015) 7
How climate change can affect financial stability Mark Carney, Bank of England (10/2015) Physical risks: the impacts today on insurance liabilities and the value of financial assets that arise from climate- and weather-related events, such as floods and storms that damage property or disrupt trade; Liability risks: the impacts that could arise tomorrow if parties who have suffered loss or damage from the effects of climate change seek compensation from those they hold responsible. Such claims could come decades in the future, but have the potential to hit carbon extractors and emitters and, if they have liability cover, their insurers the hardest; Transition risks: the financial risks which could result from the process of adjustment towards a lower-carbon economy. Changes in policy, technology and physical risks could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent. Source: Bank of England 8
Thank you! Ernst Rauch Head Corporate Climate Centre Climate & Renewables Contact: CorporateClimateCentre@munichre.com Website: www.munichre.com