Protection from perils – an Americas overview

Climate change and urbanization are changing the way insurance looks at natural catastrophes. Outdated models and historical loss data are no longer reliable enough, and that means our industry must innovate the way it assesses risk, along with its consequences and costs.

Our latest sigma addresses the evolving and complex nature of catastrophe risk and what it will take to protect lives and assets in the future, as well as build a more resilient society.

Climate change is bringing warmer average temperatures, rising sea levels, melting ice caps, longer and more frequent heatwaves, erratic rainfall patterns and more weather extremes. It has also triggered more secondary perils, like wildfires from a drought and urban flooding from hurricanes.

Over half of rising global losses to date can be attributed to economic development and urbanization in places where the largest concentration of people and capital are found. About half the world population lives in cities and that number is expected to increase to nearly 70% by 2050. In 2019, insurance covered USD 59 billion of the USD 144 billion in economic losses from natural catastrophes. While total losses were lower than previous years, the gap between what’s insured and what isn’t is still significant and unsustainable.

In the United States, this gap is partially due to flooding, for which most residents are unprepared. An estimated 5 in 6 US households don’t have flood insurance, and that’s why Swiss Re is working to make flood coverage available in the private market. We’ve developed a model that allows us to underwrite to the individual exposure. And our clients are launching new flood products, offering coverage as part of a traditional homeowners policy. Learn more at our US flood page and read our sigma extra on the growing flood and wildfire risk. 

Across Canada, cities and towns are more susceptible than ever to the impacts of wildfires, earthquakes, ice storms and other extreme weather hazards. Canada is also exposed to flooding. For flood risk in Canada, we estimate 60% of property exposure is not insured against flood risk country-wide, and flood-related losses have increased considerably over the past 10 years. Without improved disaster preparedness in Canada, the gap between economic and insured losses is only going to widen. Learn more about flood risk and the flood protection gap in Canada via our expertise paper.

Canada is also susceptible to earthquakes, which can be trickier than other perils as it's not easily predicted, can strike in seconds and is not in people's minds. This is especially true in eastern Canada, where there is a general lack of awareness about earthquake risk and earthquake insurance. Three of Canada’s largest cities – Montreal, Ottawa, and Quebec City – are in seismically active zones and we estimate that a magnitude 7.3 earthquake near Quebec City could result in total losses to residential property alone of CAD 10.6 billion. Find out more about earthquake risk in Eastern Canada via our expertise paper that helps shed much needed light on the topic and exposes the consequences the region faces if steps aren't taken now to increase resilience.

In California, earthquake is also a significant risk and much of the losses the state would suffer would be uninsured. However, we're addressing that with a new parametric solution for small business owners called Quake Assist which helps them meet their expenses and protects their revenue streams after an earthquake. Learn more here.

Latin America is also exposed to different natural catastrophe events. For example, Brazil is more susceptible to flooding events, while Chile, Colombia and Mexico are exposed to earthquakes, and hurricanes in Colombia and Mexico. Although in 2019 economic losses from disasters represented USD 9 billion, the region still faces an important protection gap. In 2017 natural catastrophes caused economic losses of USD 31.6 billion, from which only USD 5 billion were insured. Parametric solutions are a good way to close the protection gap in Latin America by allowing access to fast payments to protect customer's physical assets or business interruption due to the occurrence of a catastrophic event. For more information about these solutions contact your local office in Brazil, Colombia and Mexico.

Let us help you understand and manage the changing risk in your portfolio and tap new markets. Contact us today.

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