Swiss Re AG (SREN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Virtual Media Roundtable: Sigma Research on Natural Catastrophes and Swiss Re's Climate Change Strategy Conference Call and Live Webcast. I am Sherry, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mrs. Alexa Winnik, Communication Business Partner. Please go ahead.

Good morning, everyone, and welcome to our virtual media roundtable on Swiss Re's climate change strategy and the new sigma study: natural catastrophes in times of economic accumulation and climate change risk. You've all received or you should have received the materials associated with the latest research and that includes the press release. As noted on the files themselves, they are embargoed until publication, which will be tomorrow, Wednesday, at around 10:00 a.m. Central European time. Our speakers will each briefly present, and then we'll open the line to your questions. We'll start with questions from those dialing in and then we'll move on to written questions from those joining solely via the webcast. Many thanks for joining us. We look forward to an engaging back and forth. I'll hand it over to Edi Schmid, the Chairman of the Swiss Re Institute and Swiss Re's Group Chief Underwriting Officer, to begin the presentation this morning. Edi?

Good morning, and a warm welcome to this virtual media roundtable. Thank you very much for joining us, particularly during these exceptional times. I hope everyone has a safe and comfortable place to work, as many of us at Swiss Re, from home. I struggled a bit to dial in, but I managed, so I'm really glad to welcome all of you. So I'm Edi Schmid. I'm the Chairman of the Swiss Re Institute and also Swiss Re's Group Chief Underwriting Officer. And I'm joined today by Jerome Haegeli, our Group Chief Economist; and also by Martin Bertogg, who is heading our Catastrophe Perils unit. Actually, tomorrow, we'll publish the Swiss Re Institute's sigma report on nat cat and man-made disasters, and we're very happy to already discuss the main findings of this report with you today. For those maybe not familiar with this report, this is one of sigma's annual flagship publications, and this is already its 52nd edition. Of course, little did we think we'd be releasing this year's report at such unprecedented times when the entire world is in the grips of a pandemic. The COVID crisis has been dominating our lives like no other event in many years. Personally, I guess, like many of you, I've been disheartened by the many human tragedies from this crisis, but I've equally been touched by the many acts of mutual support and care to deal with this crisis. As a company, Swiss Re is very well prepared to deal with a pandemic like this. There's obviously still uncertainty around the financial impact, but we deem it absolutely manageable. Swiss Re went into this crisis with a very strong balance sheet. We have a prudent asset allocation. We have put in place hedges on our assets. So we're very confident we can weather these storms in good shape. And also from an operational perspective, I'm pleased to see how we can continue to run our business around the world as our teams have found ways to use our communications technology and work together and also with our clients. Well, in all this, it's easy to forget that there was a time before COVID-19 when other urgent issues were still in the headlines. Our mission of making the world more resilient calls on us precisely not to lose sight also of other big risks. Even though it's more gradual than a rapidly spreading global pandemic, climate change is one of the most pervasive threats facing us, our planet, our society and our economy. It's also one of the biggest risks for our industry [Audio Gap] and it is because of this [Audio Gap] strategy. We are committed to apply sustainability criteria across all our activities, speed in underwriting, in asset management, but also in our own operations. When it comes to climate change, we focus on 3 areas. The first one is the focus of today, mainly, it's around physical climate change risks and climate change adaption. Obviously, our natural catastrophe business is exposed to the risk of climate change, and that's why we're devoting the nat cat sigma to this theme of climate change. The report shows that climate change is increasingly visible in our loss figures and evident as a major risk driver. Combined with the fact that we're continuing to see urban expansion in highly exposed areas. We are literally living, building, working and insuring in the very locations most at risk, each year along the coasts, the flood plains or in near forested wide land. We believe the insurance industry and Swiss Re can play a big part in developing resilient strategies and help communities recover after disasters. Just to give a few numbers. 2019 alone, our P&C Reinsurance business paid out claims over USD 11 billion and $2 billion of these claims were related to natural catastrophe losses, helping many families and businesses to recover after adverse events. To provide coverage for natural catastrophe risk, we obviously need to have deep risk knowledge around these risks. Since decades, we have invested in research and development to be on top of these risks and develop our own proprietary risk models around natural catastrophe and also climate change. Just as a little anecdote, I started my career in this company in 1991, and it was actually one of my first little projects to assess how climate change may impact the frequency and severity of European winter storms and hurricanes in the North Atlantic. The second area of focus when it comes to climate change is around reducing carbon emissions. That's what we called transition to net-zero. It's clear, we cannot simply adapt endlessly to the growing risk of climate change. We also need to tackle the source, which means reducing carbon emissions. Maybe here, there's a parallel to COVID-19, the earlier we take action, the more we can keep the risk manageable in the longer term and the avert the most damaging consequences. So we have to take drastic action to bring down emissions to net-zero by mid-century and pave the way for a net-zero future. Swiss Re, with our businesses, we are committed to be net-zero on our operations side already by 2030 and both on our asset investment side and the underwriting side by 2050. Just to give a few examples. When it comes to underwriting, for example, we are very active in providing renewable energy solutions, insurance and reinsurance. We're a leading player in, for example, the offshore wind development but also in solar power. Also as another example, we introduced in 2018 a thermal coal policy. So we do not any longer provide insurance and reinsure for businesses which main business is around thermal coal. But also on the asset side, we were an early mover to move all our assets 100% almost to ESG, environmental, social and governance criteria. We were an initiator of the UN-convened Net-Zero Asset Owner Alliance. So we are committed to net-zero emissions on our investment portfolio by 2050. And last but not least, also in our own operations, we're committed to net-zero by 2030. We have been CO2-neutral actually for a long time. But clearly, we concluded this is not enough. The focus is on business travel and renewable energy sources. So what we'll do in the future, that for every ton of CO2 that cannot be avoided, another ton actually will have to be removed from the atmosphere and stored permanently. So as of next year, we'll ramp up an internal carbon levy. So we have an incentive to fly less and generate funds so we can purchase carbon removal certificates, as clearly, carbon capture has to be part of the long-term answer. And last but not least, our third pillar is around partnering with clients to find solutions to mitigate and adapt to climate change risk. We obviously cannot deal with this in isolation. Together with our clients and partners in the insurance industry, in other industries and the public sector, we try to come up with solutions. I can hardly remember any interaction with external stakeholders where climate change has not been a topic over the last 2 years. A particular area of focus for us is to close protection gap around nat cat and climate risk. A point in time is flood risk where there's still a huge protection gap, where we use our risk knowledge, our proprietary modeling capabilities to bring this to insurance companies so they can provide easily accessible and affordable flood protection to their policyholders based on modern technology. So that's why we are devoting this year's nat cat sigma to the theme of climate change. As we launched a new sigma publication highlighting the physical impact of climate change on our nat cat business, we are very much seeing this in the bigger context of our climate change and sustainability strategy. We strongly believe that as a global reinsurer, we can play a leading role in driving climate change action with an impact far beyond our industry. With this, let me now hand over to Jerome Haegeli, our Chief Economist, who will give you the top line view of the sigma findings. Jerome, over to you.

Thank you very much, Edi. And also warm welcome from my side. This is Jerome Haegeli speaking. We are on Slide 3. And to our nat cat sigma insights, as Edi Schmid just mentioned before, a key focus of this year is the role of climate change. And last year's topic was on secondary peril. This is still very much important also in the context of climate change. In terms of the nat cat losses, as in 2019 and as reported in the sigma reports, 3 key points. First, we had an overall lower industry losses in 2019. The 10-year average was $67 billion. And 2019, we had a nat cat insured losses of $52 billion. Following 2 costly back-to-back years for natural disaster in 2017 and '18, 2019 definitely was much lower than 10-year average, same as the 2-year averages, as you can see on this slide. Second, the key events were in Japan, the typhoons, as well in Australia, the wildfires, which were the market focus. And Martin Bertogg will speak about this later on. And third and most importantly, key drivers are climate change as well as the economic development, urbanization, and we will go into that shortly. The rising losses from secondary perils as well as latest research on primary perils clearly show that climate change is an amplifier. On climate change, 2019, as you know, was the second warmest year on record. So there's a real sense of urgency that we have also in our report, on our sigma analysis that we need to take climate action. We need to take climate action now worldwide in all sectors for the benefit of society and also to build further economic resilience. On the economic development, as we show in the sigma report, the human activities, both GDP and urbanization, are key drivers for the rising insured losses while climate change is an amplifier. And what is really needed is also the industry needing to tackle how the extreme weather risk is changing to have a really comprehensive analysis. Let's dig a little bit deeper on the next slide. And this is -- as an economist, on Slide 4, this is really my favorite chart in the sigma graph. What you see here in the graph on the left-hand side, you see the global economic losses for nat cat. These are economic losses, not insured losses, so the economic losses from 1918 -- 1980, excuse me, til 2018. The gray line is the simulation with historical global nat cat data for the physical damage to show the economic losses if countries have today's GDP level. So not the GDP level at point of time in the past but today's GDP level, to really normalize the data and to see actually how does economic development and urbanization impact the data. And the blue line is the current -- is the economic losses at current GDP and priced that data at the specific times of the events. Now if you normalize the data with the gray line, what you see, you clearly see that normalizing the data at current GDP data, you get a really different picture. Nat cat economic losses would have been significantly higher in the past already if countries had the same GDP as of today. It's not to say that climate change doesn't have an effect. Climate change has an effect. It is an amplifier, but we need to have a differentiated picture. Economic development and urbanization, as clearly highlighted in our sigma report, needs to be part of a comprehensive analysis. In terms of past events, quite insightfully, if you look at the 1992 Hurricane Andrew. If the Hurricane Andrew, which was one of the most costly hurricanes in U.S. history, were to happen today -- as you know, it happened 1992, if it were to happen today, the economic losses at today's levels would be 5x [ our size ]. So this is just to underline the importance of urbanization and economic development. And to really sum up, on the next slide, and you see here the key drivers for the rising weather-related losses. And the key drivers, they are the urbanization/economic growth, which we have just highlighted. Second, obviously, there is also the insurance penetration. And if you look at the protection gaps globally but especially also in emerging markets, when it comes to nat cat events, and Edi Schmid alluded to that, there's a great need to increase further insurance penetration. And the third key driver for the driving and rising of weather-related losses is definitely climate change. So bottom line, we need to take the climate change and we need to take the economic development into account into having a comprehensive analysis. Urbanization is really key. And on the urbanization, I just wanted to share with you one amazing statistic. If you look at urbanization and the pace of urbanization, fact is that the world builds an entire New York City area every month for the next 40 years. So clearly, urbanization and economic development, together with the climate change, will be a core driver for the rising weather-related losses that we are likely to going to see again with growth as well as with climate change amplifying these events. And with this, I'm really happy to hand over to Martin Bertogg. Thank you. Martin, to you.

Thank you, Jerome. And I'm heading off into what makes 2019 now a special learning event also for us. Some effects of climate change are extremely evident already today. So it's the warmer average temperatures, which are not debated anymore. We have rising sea levels, which are measured all over the globe where we have oceans. We have melting ice caps and glaciers. We have these heat waves hitting us quite globally, more frequently than before. There's some erratic rainfall patterns here and there, let's say, more weather extremes, generally. Now, what does that mean then for natural disasters and insurance as higher temperature itself is not yet a natural disaster? 2019 provided a few learnings again, and I'm picking here 3 specific examples. They're also discussed more in-depth in our study being released tomorrow. And starting with the most obvious, the most tangible one, which is influenced -- or made much more likely by climate change. So that's the Australian bushfires, which started well in 2019 but only ended in 2020. This has been the longest ever bushfire season in Australia. And I think everyone is aware of on all this news coverage coming from there. It's the most land whichever got burnt. It's the most houses ever got burnt down to the ground and also the costliest for the insurance industry. $1.5 billion has been paid there to also help and to recover. So the insurance cover has been quite complete there. So that's possibly the good news despite the big extent of that specific catastrophe. Also there, important to note, climate is one factor to this being more likely to happen. The other one is what Jerome alluded to, is urbanization, or in this case, more the urban sprawl, people living or choosing to live closer to the wilderness are absolutely important to make this happen. And similarly, we had catastrophes of learnings, 2017 and '18 in California. And also the urban sprawl eventually is a key reason for having this large damages then to our society and also to insurance companies. So it's not only about climate change in this angle, also finding a different way on how to live sustainably close to the wilderness. That's one learning corner where climate change is most tangible. Then we have the typhoons in Japan. Clearly, for the insurance industry, these have been the biggest events, the biggest -- an event also being a learning opportunity. Insured losses of $15 billion have been covered there, most notably in the typhoons Hagibis and Faxai, both of quite similar size, affecting the mainland of Japan. There's 2 learnings we've taken away and discussed also in the report, the first one kind of being maybe the less spectacular is that Japan is an island or is a group of islands which has always been exposed to typhoons. But there was a lucky period. Since 1991, there hasn't been any strong typhoon hitting Japan, a few smaller ones. But in 2018 and '19, now, in particular, they came back, Jebi in 2019, Hagibis and Faxai. They served as a strong reminder that there's a high typhoon risk in Japan which nearly got forgotten. So that's not climate change per se. Then a second learning, which these typhoons have been bringing along, and it's in particular, Typhoon Hagibis. And Typhoon Hagibis was less remarkable from a wind speed perspective, but it was very remarkable from a rainfall component. So enormous rain coming down, often not completely unseen in the past in Japan. Already in the '60s, there were with some typhoons with heavy rainfalls. And a lot of flood defenses has been built post these events in the '60s actually also with some good success. So the metropolitan area of Tokyo got more or less spared from the impact of the torrential rain due to the flood protection, but not the rest. The more outskirt regions of the Greater Tokyo metropolitan area got affected quite heavily by the severe flooding. So what this tells is also learning that the human mitigation measures can be very effectful, and they are extremely key to also monitor when looking at the risk landscape on top or even masking sometimes climate change effects. The last learning I'd like to pick up or showcase is the Cyclone Idai in Mozambique, which probably many of us don't have on our radar anymore. Tiny event affecting an area which is not that much covered by news. The insured losses speaks story there. Very little insurance cover in Mozambique at the time while the economic losses were still quite considerable. And in this case, clearly, urbanization a key factor: the city being built very close to the ocean coast, no protection measures or hardly any protection measures, nature being cut back also close to the coast exposing these urban areas completely to this wind storm happening. So again, the human factor beyond climate change favoring some of these events being a key one to observe. As I mentioned, all these 3 examples, I have been careful to not say it's climate change causing them as none of these events have a climate change trademark to it. That's not mentioned anywhere. It's rather climate change make some of these effects much more likely to happen. And when it comes to wildfire, it becomes more tangible. When it comes to hurricanes or typhoons, these big storm events, climate change is still masked where the urban impact often is more important -- or it's the urbanization impact of human development is a more important factor changing this risk landscape. But what all these 3 events serve for us as an industry is to make a point. It's not a static risk landscape. It's a dynamic picture. Year-on-year, this changes. Urban sprawl, as Jerome was mentioning, one city of the size of New York coming in addition, that means something on that risk landscape on top of climate change. And that's the big learning we're also discussing through the whole sigma study, that these dynamics have various factors. And in terms -- and if we move on to the next slide, Alexa. Quite a symbolic slide that us, in general, as human beings, but also the insurance industry, the typical way looking at these risks from natural perils and disasters, looking backward, taking an average of a longer-term historical observation period is done here with temperature regimes on this slide. And it's quite obvious. If you take the dividing line from today and the future, in this future depending also on the climate adaptation paths we take, they might be quite different, the outcomes in temperature. But there's also different outcomes in terms of ongoing urbanization. So it's being forward-looking rather than backward-looking in the industry, which you might think is standard. But that's the learning. That's why we have to do considerably more to challenge this paradigm, that the past is the best measure for the future. And climate change is clearly a very important variable in this mix to make the future look different from the past. And why is this all important? Alexa, if you move on to the next slide. Why does it matter eventually if the insurance industry gets the risk assessment right? It's all about the sustainability of that business model. What we show here in this chart is what we term the protection gap over the last decades. It's illustrated on how much economic total loss occurred in our sigma monitoring studies compared to how much of that has been covered by insurance protection by insurance cover in place. The latter is quite significant, but clearly there is a gap. If you look at the last decade, it's about $1,600 billion of economic losses, an enormous figure, over these 10 years. If you'll take some of the billion of that that's an enormous figure covered by insurance industry but only about 1/3. That 1/3 remains quite a bit the constant over the history despite insurance picking up by significant levels. If you just compare already the decade before the last one, maybe it's roughly about half of the level of today but there's still lots to do to bring insurance protection to our small commercial entities, to individuals to increase their resilience on the financial side but also to close the protection gap. And for that purpose, to stay on top here and kind of have a sustainable business model, understanding these risks with a forward-looking perspective, including, in particular, climate change as well is absolutely paramount for the industry to survive and make it a successful business model also down the road. With this, I stop my few learnings.

So many thanks to all the speakers. At this point, we're going to move into the Q&A part of the call today. And as I mentioned, we'll start with those on the line. And I believe Sherry, the Chorus Call operator, will be taking that on. So I hand it to you, Sherry.

[Operator Instructions] There are no questions from the phone at the moment.

In that case, we have received a few questions from a participant on the webcast. His name is -- I have to read it out, of course, because he wrote them, [ Dennis Delba ] from [ Sell Better ]. He wrote, and this just seems to be a question to anyone who would like to field it. He writes that, "Weather risks are still insurable under certain measures. What time frame are you assuming?"

Maybe I'll give it a start, Martin speaking, as this is close to my mandate also within the company to ensure -- to have an insurability remain there. And I believe it's referring to just my last comments to stay on a forward-looking perspective. Right now, the sigma study is also elaborating that. We don't see ourselves from a climate change perspective having reached the tipping point. So changes are not dramatic from one year to the next year. There are changes, but not dramatic kind of endangering the sustainability of the insurance business model. As long as we can follow that trend, but we have to actively. Insurability is not at risk. Clearly, there's some areas in the world that's particularly close to sea -- to the sea coasts where sea level rise, which is the most tangible hazard factor, we'll make some of these areas uninhabitable unless human beings are taking some precautionary measures. There's a discussion in the same study about what The Netherlands has been doing over the last not decades but even centuries, in protecting them from the sea, but now also from the increasing sea level. So for the insurance industry, it's important to not partner but be in lockstep with what humanity is also doing beyond just financial risk transfer to protect the most exposed areas. But in general, insurability, right now, let's say, in the next decade, we don't see at risk at all. We have not reached any of these tipping points where the nature dramatically changes from one year to the next.

Thank you, Martin. We also have another question. How can Swiss Re support the transition to a low-carbon world? Could you please elaborate on this a little more? Once again, this is sort of open. I don't know, Edi, if you want to comment on this.

I'm happy to go first and give you a few directions what we try to do to help the world move to a low-carbon environment. First, as I pointed out in my introductory comments, it's important to apply this on all parts of our business. And that's why we have embedded it in our sustainability strategy. So again, if you look at the underwriting area, we can, for example, support new technologies to move to more low-carbon energy production, like ensuring wind farms, solar, maybe in the future, also carbon capture just to find insurance solutions to help these new technologies to grow and more and more shift to energy production that is carbon neutral. And then it's important also on the asset side, as I pointed out, we have moved to ESG criteria for quite a while. So via our investment decisions, we can also make sure that the economies are accelerating to move to a low-carbon environment. And then it's also in the operational area, that we make sure that our own operational footprint is getting even quicker to a net-zero carbon environment. And then it's obviously also via our research, engaging with many partners out there with the public sector to really work together and to have more tangible decisive plans to move on. I think these are just a few hints, what we are doing. And then obviously, it's also as particularly Martin Bertogg pointed out. It's about carbon reduction, but it's also about mitigation and adaption because to some extent, climate change will be there. So we still have an ambition to provide more coverage so we can help for those risks that cannot be avoided to at least help people then to recover and get back on their feet quickly if events like the ones pointed out in the sigma happen.

I would add to Edi's elaboration on the underwriting side, as this is eventually the core of our existence as a re- or insurance company to maintain insurability. Also relating to the question before, if we can remain that resilience factor -- we can uphold the resilience factor for the whole economy, that's absolutely core. And that it's being forward-looking and also adjust to new risk levels, for us as Swiss Re, but for the whole industry, it's key to maintain that. And that's a strong contribution also kind of mitigate some of the effects in climate change.

This is Jerome speaking. Maybe to add on the point of financial markets impact which Edi Schmid alluded to. In Swiss Re, we pioneered the usage of ESG integration. And the fact is all of our asset management balance sheet is now tracked with ESG-compatible benchmarks, which is a good thing because then we know our ESG levels and also it helps us to transition to a low-carbon footprint on the asset side. And given that the insurance sector has both this dual-positive role in underwriting risk and providing risk transformation to the primary insurance sector from the reinsurance perspective but at the same time, we are also long-term investors. So doing this transition on the asset side is also very, very crucial. And if you look at the studies out there, and we also co-wrote it in our nat cat sigma, if you look at the studies out there in terms of what climate change could potentially mean for world's financial assets, it's clear that climate change is a systemic risk. Some studies, they're a little bit dated and there's a big range in terms of impact estimates, but the impact estimates suggest that up to 1/4 of today's long-term investment assets under management, up to [ $14 trillion ] of the world's financial assets are at risk of becoming impacted of climate change. So that's why I also strongly agree with former Bank of England Chairman, Carney, that climate change is a systemic risk and we really need to have a better and more green financial system. So it's really both sides of the balance sheet where Swiss Re is acting and where also our industry needs to act. Thank you.

So I have another question. The question, if the costs rise, to what extent will certain assets slowly but surely become uninsurable and if there are any examples? And then also how -- to what extent the situation is going to be influenced by corona, if there's any comments that you can make on that, the coronavirus and its effect currently might have some effect on how insurers can respond to nat cats in the near and long term.

Maybe I'll give a take on the uninsurability question, probably repeating myself a little bit with what I mentioned before on a similar question. It's the areas where we see most at risk to become stressed areas for insurance protection is close to the seaboards where we have sea level rises in particularly flat areas. So parts of the U.K., maybe in parts of Florida being affected by that in rather decades than in the next years that sea level rise as unmitigated, and that's probably a keyword here, to such a high exposure that insurance becomes a question of economic viability. It's not that it's uninsurable in its sense, but if it's more or less a certain loss, it's just the premium gets so high that it's not viable anymore to pay for insurance. Actually, these areas most highly at risk are probably also areas where -- today, construction has been going on in areas where basically they should not even build, even known areas of high exposure. And that's happening particularly in large urban conurbation, that with this pressure on growing cities, that it's not always the most favorable places which are overbuilt by buildings. So also there, the human impact is an important one, not on the climate change side, but by planning or kind of failing also on the planning. That's the areas which become, in this corner of economic, becoming not really a good value proposition for insurance anymore. Human mitigation will add some to that or kind of reduce some of that risk, and even more likely, people will leave these places before even the question of insurability comes up. So right now, with having no tipping points around, we are not that concerned that the question of insurability really hits the industry that strongly, might be in corners and areas.

Maybe I give a shot at the second question, which I understand is around what COVID-19 may mean for insurance solutions in a bigger picture. And the first thing I would say, insurance and reinsurance this is -- has a purpose of being a shock absorber to individuals and to the economic system overall. And particularly during these very difficult crisis times, the insurance industry has to continue to provide its service to policyholders and to society. And also at Swiss Re, we have prepared a lot and we are very happy that have our businesses actually continue in an as-normal-as-possible way. So we continue to provide coverage. We pay value claims very swiftly. So during these times, it is even more important. What I would also point out that COVID-19 will be a stark reminder that it's all about risk management, which means to think about potential adverse in areas early and make efforts to mitigate the risk and find ways to be better prepared with various measures. What I would also like to point out around COVID is that what is very important for the insurance system to function is that insurance is all about agreeing ex ante what type of losses and accidents will be covered, what's the level of premium agreed beforehand, and then it's clear when bad things happen who gets what level of compensation. So we need to be firm to defend that actually the rule of law apply. Obviously, there's some pressures to pay claims that are not covered according to the original policy, which really would not make the insurance system as a whole sustainable. So what I would point out, that COVID, as it unfolds, is a bad crisis. It's not, let's say, in that sense, a surprise. Pandemic risk as nat cat has been a risk factor we have studied and researched for many years and built our models. And as in other crises in the past, there will be a lot of learnings. We can do even better to help individuals, businesses and economies to deal with crises. But I think it's also important to highlight that the capacity to provide coverage for pandemic risk is limited. It is a very systemic factor. The losses, the impacts go across the whole world. It affects the underwriting side and also the financial market side. So we can only provide pandemic cover to a limited extent, and there needs to be solutions that also involve government backup as it would go beyond the ability of the insurance industry alone.

This is Jerome speaking. I would like to add one point to what just Edi Schmid have said. Edi mentioned that COVID-19 is a stark reminder about the risk management and risk management services that an insurance industry covers -- the insurance industry provides. While COVID-19 and climate change has clear parallels, I think there are also very important differences: parallels, both COVID-19 and climate change or global crisis; differences, pandemic will end at some point, climate change will not. That's why it's even more urgent that we take a long-term view and we act now. And our industry is really about thinking long-term and providing risk knowledge capabilities and services so that we also adapt over the long term, provide the -- during the climate -- provide solutions to the climate crisis needs with transformation, switching to renewables, for instances, but also support adaptation to risk innovations. And obviously, also as Martin Bertogg mentioned, provide the insurability so that we have the risk-taking capacity to move and adapt to a new world of low-carbon emissions. So clearly, parallels, but also very important, differences. And I think -- and my wish will be that with the COVID-19 a wakeup call, we don't just take actions on the pandemic, which are necessary and needed, but we also take actions longer-term together with the public sector and the industry in adapting to climate change. Thank you.

The first question from the phone comes from the line of Paul Arnold from Reuters.

I would like to talk again about the current situation, if possible. As you said, despite the efforts to reduce and better hedge risks, there were still cases with climate change. Do you think that clients will, at least in the near future, demand more insurance again this type of risk like epidemic or pandemic? And do you think that the industry may need to provide, let's say, new adapted offers for this type of risks?

Thanks, Paul, for that question. I think it goes without saying that the current COVID-19 crisis is a stark reminder of pandemic risk, and many people may have underestimated this exposure in the past. So I would clearly expect to see an increased awareness and demand for coverage. As I've already pointed out before, as an industry, we need to be very realistic what is our role to play around managing a risk like pandemic because of its clearly systemic nature as it is with other risks of that type, you can also put terrorism and some parts of accumulating cyber risks. The insurance industry can contribute a lot in terms also of risk management services, of increasing the awareness, of understanding the risk. It can make some coverage available as we do for pandemics. Most of the mortality policies obviously would cover deaths from COVID-19 or from a pandemic. But as I pointed out before, the systemic nature is so broad that this cover can only be provided to a limited extent and it needs to be clearly defined and also an adequate premium needs to be charged. But the systemic nature, as it also correlates with the financial market as we see, means that it cannot be diversified well so it needs also a government involvement to make it manageable. So we'll try to do more as in the past, but clearly, the capacity to take such systemic risk of the insurance industry is limited.

There are no more questions from the phone.

We have one more question that I have, a written question. And that was that what was perhaps the most sort of surprising finding from the research, the sigma research? Is there anything you'd like to note that actually was a bit surprising to you, and I don't know, maybe this question is for Martin, that you ran into the data?

Yes. Some of the -- thanks for the question. And I ask myself the same, what makes 2019 special? And I would take one step back and say it's 2019 in the series of what we see in 2017, '18 and '19. It's these 3 years as a whole are specializing for all of us, but particular for the insurance industry, as they kind of evoked the theme of a changing risk landscape very strongly. There was a very quiet period for natural perils, I would say, starting 2005 with the big hurricane series in the U.S. Some of you might remember Hurricane Katrina being the biggest event. Then 2010 and '11, a bit of activity globally with earthquakes in Japan, in New Zealand. But overall, kind of a rather quiet period. Now the last 3 years have kind of made this point of, "Hey, there is something moving on." Climate is one of the drivers behind it or the climate change is one of the drivers, but also urbanization effects are becoming much more tangible. So I wouldn't pick 2019 as specifically eye-opening. But in a series of 3 years, you start to realize it is something ongoing. We're not in a static world anymore. And that's what I would take away as the key observation. And that's the key learning for the industry is to get out of this moot, the last -- taking the average of the last 20 years is good enough. That's clearly not good enough anymore, both with what we've seen now across many bigger kind of headline events in 3 years.

Many thanks. And we have no more questions appearing on the line or on the webcast. So I just want to, once again, thank everyone for joining. And if there are any follow-up questions, please feel free to shoot Media Relations an e-mail and they can try to answer your questions with the experts on the line after the fact. Once again, just as a reminder, the materials you received are embargoed until publication, which will be around 10 a.m. tomorrow, Central European time. So just keep that in mind. I'm told by my colleagues in Media Relations to make sure that's clear once again. And yes, thank you once again. Hope everyone has a lovely day.

Thanks, everyone, for joining. Stay safe and keep a distance.

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