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Executive Perspectives

EXECUTIVE PERSPECTIVE: Swiss Re addresses Water Risk

Tim Nixon

16 May 2018

16 May 2018

The U.S. state of Louisiana is under water risk pressure from all sides.  Record flooding.  Sea-level rise.  Cities facing the possibility for eventual relocation inland.  Massive port and industrial infrastructure at risk.

In order to address this accumulating set of problems, the city of Baton Rouge is hosting experts from across the nation and world on the latest lessons in building resilience and adaptation capacity.  The private sector is also an important partner, and Swiss Re, the global re-insurer, was there to address the group of policymakers, scientists and concerned citizens.

“There is close to $30 trillion in assets under management in the global insurance industry” according to Alex Kaplan, Senior Vice President, Swiss Re.  “The opportunity is making it easier to invest this pool in creating green infrastructure which averts significant amounts of risk in the future.”

In other words, how do you increase investment in infrastructure that lessens the severity of future losses?  How is that averted loss valued?  Who pays for the investment?

A couple of examples of how this might work include the building of natural coastal infrastructure, i.e. mangrove or marshland, which measurably reduces the risk and cost of future storm damage.  Or the building of protective green spaces and park infrastructure in cities like Houston which are prone to disastrous flooding.  Or even the creation of pools of funding to rebuild coral reefs after they are damaged by storms through replacing broken coral within days of a storm event.

A question in all of these types of examples is how to create a private-public-philanthropic partnership model which can, when paired with cutting edge science, deliver measurable value in averted losses to coastlines, cities, aquifers, coral reefs, and numerous other examples of vital natural resources which are also vital economic resources.

“Green infrastructure is the best investment, dollar for dollar” explains Swiss Re’s Kaplan.  “We are at the cusp of creating risk financing mechanisms to preserve and build critical green infrastructure which provides growing future benefits to increasing populations.”  For the insurance industry, this will likely become an increasing focus, and it faces mounting catastrophic losses from climate forces which in theory are, while perhaps not preventable, reducible in severity.

Many observers may also question the wisdom of trying to preserve coastal infrastructure which sea-level rise will likely eventually make untenable.  To this key question, Kaplan has an interesting insight.  “Everybody has their time horizon for which they are most concerned.  There is much we can do to reduce risk and improve community recovery times.   These measures will also save lives where people are not practically able to relocate.”  This approach is essentially a way of buying time for communities most at risk.  In the meantime, innovation and planetary mitigation strategies will have a chance to mature, hopefully in time to matter.

 

 

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