Asia faces real battle against climate change, warns Varbanov of Swiss Re

“The fight against climate change will not be won or lost in Europe or Africa because there are not enough coal-fired power plants there and not much is being built. The decision will be made here in Asia.”

This remarkable statement comes from Lubomir Varbanov, Managing Director and Head of Public Sector Solutions Asia-Pacific at Swiss Re, who EAIC today in Hong Kong to discuss the specific challenges – such as the fight against climate change – and opportunities that will shape Asia, and the role of the insurance industry in addressing these challenges.

Varbanov said the market is in what some describe as a “polycrisis” – an accumulation of multiple, interconnected risks. The term was first coined by the World Economic Forum last year after it said it needed “a new descriptor to define the scale of the problems facing the world.”

“We are not just dealing with one or two challenges,” Varbanov said. “It is a constellation of risks, including geopolitical instability, energy security, climate change and supply chain disruptions, that requires a holistic approach.”

This complexity, Varbanov said, presents both significant challenges and unprecedented opportunities for the insurance industry. “The question is how we tackle them, individually as Swiss Re, but also collectively as an industry,” he said, stressing that Swiss Re's focus on the public sector – including partnerships with governments, state-owned enterprises and multilateral development institutions – makes it well positioned to deal with these crises.

Closing the gap

One of the most pressing challenges Varbanov highlighted is the growing gap in protection against natural disasters, particularly in the Asia-Pacific region. “When looking at the global gap in protection against natural disasters, it is worth taking a look at what has happened in the industry in recent years,” he said.

“It used to be said that a year with insured losses of over $100 billion was a difficult year. But now four of the last five years have exceeded that mark.”

According to Swiss Re's March Sigma report, global insured losses from natural catastrophes reached $108 billion in 2023. By mid-2024, that figure will reach $60 billion, with $8 billion coming from the Asia-Pacific region alone, Varbanov stressed, citing the results of a Sigma report published in August.

“We are experiencing a reality where extreme weather events are becoming more frequent and more severe and geographic patterns are shifting,” Varbanov explained. This, he said, presents an opportunity to expand risk transfer capacities, but to be effective, partnerships with governments and other stakeholders are needed.

Varbanov stressed that the role of the insurance industry goes far beyond simply absorbing shocks after disasters. “The insurance industry is often seen as a shock absorber, and that is true, but it is also incomplete,” he noted.

Instead, industry can add significant value at earlier stages, particularly by helping to develop and implement climate-resilient infrastructure and projects, he argued.

“Certain pieces of the puzzle can only be put together by the government to address the complex challenges facing the region,” he said. Partnerships, Varbanov explained, are key to fostering innovation and building resilience.

“Opportunities are often defined by need,” he said. “And in Asia, the need is clear.”

Data is important

One area of ​​potential that Varbanov highlighted is the use of data and analytics to improve decision-making, particularly in areas such as land-use regulations and infrastructure development.

“We have partnered with Australian local governments to use our analytics to better tailor their zoning regulations,” he explained. This will enable councils to keep development away from areas that are particularly vulnerable to climate risks, creating more resilient communities.

“Parametric products can fill gaps that traditional insurance cannot fill.”

He cited the example of renewable energy transmission infrastructure, which has historically been underinsured. “The industry has not insured transmission assets, and that is a big gap,” Varbanov stressed. Swiss Re has stepped in to find solutions to this gap, particularly in countries like the Philippines, and plans to explore similar opportunities in New Zealand.

Varbanov said the use of insurance-linked securities such as catastrophe bonds is attracting growing interest across Asia. He cited the Philippines and New Zealand as examples where governments have successfully used catastrophe bonds to transfer risk. In Hong Kong, Swiss Re was involved in the launch of a catastrophe bond from Chile on the Hong Kong Stock Exchange, indicating growth in alternative risk transfer solutions.

Parametric insurance, which makes automatic payouts after an event when predefined triggers are met, is one area where Varbanov sees growing potential.

“Complex challenges like climate change require systems thinking and an integrated approach,” he said. “These parametric products can fill gaps that traditional insurance cannot fill, particularly in emerging areas like renewable energy and transmission infrastructure,” he noted.

More news from the Conference of the East Asian Insurance Congress (EAIC) Click here.

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