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Sep 2022

Building resilience the Swiss way

Source: Asia Insurance Review | Jan 2020

Industry behemoth Swiss Re recently saw a change of leadership for its Asian operations. We caught up with the unit’s new head, Russell Higginbotham, on the sidelines of the SIRC to talk about performance in the fastest-growing region in the world.
By Paul McNamara
Swiss Re’s new CEO reinsurance Asia and regional president Asia Russell Higginbotham is no stranger to the reinsurer, having first joined the firm in 1994. 
The role he held immediately preceding his Singapore posting was as CEO reinsurance and regional EMEA and during his time with the firm he has held roles in Japan, Australia and the UK.
Taking the helm of the business unit that covers the fastest-growing insurance and reinsurance market on earth presumably brings both opportunities as well as challenges, but Mr Higginbotham seems quite sanguine facing the future.
“We’ve been in Asia for a long time,” he said. “If you look back 10 years, we’ve more than tripled our business here and if you look forward five years, we aim to double the business. Our ambition over the next 10 years is for 50% of the growth of Swiss Re to come from Asia. That would leave the Asia region representing a third of our business - and a third from EMEA and a third from the Americas. You don’t have to go back too many years to see when Asia was 10% of the group.”
It may be fast-growing, but presumably the past 12 months have thrown a few surprises at reinsurers in Asia? “The biggest surprise was probably around typhoon Jebi,” Mr Higginbotham said. “In 2018, the market predicted $6bn in terms of claims. The figure went from US$6bn to US$13bn when the Japanese clients had to finalise the figures at the end of the year. That was not a positive surprise.”
The climate catastrophe
For many reinsurers, the climate catastrophe is the gift that keeps on giving. “It’s easy to say that this is a climate change thing, but I think that’s a simplistic perspective,” Mr Higginbotham said. “When we look at the history of weather events in the region, we see a 30-year pattern. There were big claims in the 1930s, ’60s, ’90s, now into the 2020s. So based on history, the frequency doesn’t seem to have changed particularly. But what has changed is the severity impact.”
And each new catastrophe is a learning experience. “Over time, what you see is a migration of people and assets to more coastal regions – higher-value assets, potentially more vulnerable assets. So when you get this more intense rain, you’ve got more value assets at risk in the zones where historically it wasn’t,” Mr Higginbotham said. “We all need to learn from that and adjust our models. Learning, updating and charging the prices that are commensurate with the risk is part of what we do.”
A (Swiss) role for everyone
One of the themes to emerge strongly from the recent SIRC was the call for all businesses to acknowledge the part they play in the fight against climate change. How is Swiss Re tackling this issue?
“There are two answers,” Mr Higginbotham said. “One is the liability risk that we put onto our books, and the other is how we conduct ourselves as an organisation. 
“On the second one, Swiss Re has talked about climate risk for years. It first became a risk topic for us the late 1970s and we were one of the founding members of ClimateWise.”
Actions speaking louder
Sometimes it’s not the grand initiatives but the little things that give an indication of how serious an organisation is in its commitment to climate action.
“We have our policy on coal and we don’t support businesses with a heavy use of coal,” Mr Higginbotham said. “We’ve done lots of things for our staff. If they want personally to invest in something which is climate friendly, like an electric car or white goods with the lowest emission, the company will subsidise them. That sends a strong message to the teams. We’ve bought carbon offsets for travel and the buildings that we construct. Our offices within those buildings are also environmentally friendly.”
Indeed, Swiss Re is sometimes acknowledged as a pioneer of the concept of ‘resilience’. “If you think about the stages of resilience, the first stage is improving understanding and awareness of the topic and so we talk a lot about it,” Mr Higginbotham said. “We put a lot of publications out there. We have people dedicated to it so that the knowledge within our client base, and also in the wider world, improves. 
“We’re trying to build more resilient communities and societies, which means building in the most appropriate locations, having the right building standards, building the right protections against floods and so on. That minimises and mitigates the impact of any climate event that might come your way. And then in turn, insurance risk transfer comes in because you can mitigate and minimise, but you can’t always get rid of that risk completely.”
Cyber, cyber everywhere
Where does cyber feature in Swiss Re’s planning? “Cyber is one of the fastest growing lines of business with 25% growth last year,” Mr Higginbotham said. “I think there’s about $4.5bn of cyber premium in the market. When it started to emerge a few years ago, Swiss Re was relatively cautious. If you want to write risk, the first thing you’ve got to do is understand the risk. We saw there was demand there. But I think we didn’t feel at that early stage that we understood it enough to say ‘this is the right price for the risk’. 
“A few years down the line, we’ve invested a lot in R&D on cyber, and also in working with partners. So we have a much better understanding of the risk. Every time a cyber event happens, there are things to be learned. We work with third parties to look at their cyber risk and we advise them on how to reduce and mitigate it. So, when it comes to looking for a risk-transfer mechanism, we need to understand the risk better so that they can understand their risk better, enabling their ability to mitigate and reduce it. And therefore, if you’ve got a defined risk, you’ve got a reasonable price for it. That’s the path we’re heading down.”
The great rates mystery
There are different views at present over whether rates in Asia, excluding Japan, are hardening the way they seem to be elsewhere. Mr Higginbotham has a more nuanced view. “It’s very difficult to say whether the market is hardening because it’s very specific to a line of business,” he said. “You have to be a little bit more surgical about it rather than general. When we think about the renewals coming up, Japan’s a bit of a special case for wind and flood type risks. When you look across Asia, where it’s been a relatively benign environment, you would expect more stable rates. We’d like to see more rate hardening, but it’s a competitive place. We’re happy with our market share. If we plan to grow that over a period of time, we need to remain competitive.” A 


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