Collaboration holds worth, asserts Danielle Brassel of Zurich
In the world of large insurance companies, the alignment between investment managers and underwriters regarding climate risk management is an essential factor. This alignment is influenced by several key factors linked to stewardship practices, climate risk modeling, and investment decision frameworks, as demonstrated by Zurich, a Switzerland-based multi-line insurer.
- Stewardship and Sustainability Commitment
Zurich takes a proactive stewardship role emphasizing sustainable investments and climate resilience. Led by Linda Freiner, Group Head of Sustainability, Zurich prioritizes investing in renewable energy projects and climate innovation, developing insurance products incentivizing climate-friendly practices, and fostering partnerships on climate solutions. This stewardship ethos helps align investment managers and underwriters by creating shared goals focused on climate risk mitigation and a transition to a low-carbon economy.
- Climate Risk Integration in Models and Decision Tools
Zurich uses sophisticated climate risk models and tools such as the Zurich Risk Room, a proprietary country risk analysis platform covering over 170 countries and 200 risk indicators across environmental, economic, social, and geopolitical dimensions. This tool supports scenario analysis, risk trend assessment, and decision-making within enterprise risk management frameworks. Having a shared, dynamic risk visualization tool helps both underwriters assessing exposures and investment managers evaluating risk-adjusted returns to align their risk perspectives and priorities.
- Exposure Data and Advanced Catastrophe Modeling
The insurance industry, including Zurich, increasingly relies on advanced global exposure models such as the Global Dynamic Exposure Model, which uses detailed, building-level data to assess multi-peril risks and climate hazard correlations. Such granular exposure data enables better underwriting risk assessment alongside investment risk evaluations, harmonizing risk insights across functions.
- Evolving Industry Context and Climate Loss Trends
The escalating costs of climate-related insured losses, rising premiums, and growing challenges in insurability influence alignment. With climate losses outpacing GDP growth and some regions becoming difficult to insure, both investment and underwriting functions are pressured to adapt strategies. This shared urgency fosters convergence but also poses alignment challenges regarding risk appetite and capital allocation.
- Collaborative Risk Mitigation and Innovation Culture
Zurich’s approach embraces innovation in risk mitigation—for example, flood resilience planning and community climate education programs—that underpin sustainable risk reduction. Investment managers and underwriters co-develop incentives and products supporting these goals, reinforcing alignment through shared responsibility for climate risk stewardship and resilience-building.
In conclusion, factors affecting alignment include shared sustainability commitments as a basis for stewardship, accessible and sophisticated climate risk and exposure modeling tools, response to the challenging climate loss environment, and collaborative innovation in risk mitigation. Zurich’s integrated use of analytical platforms like the Zurich Risk Room, its leadership in sustainable investment stewardship, and the industry's move towards proactive climate risk management collectively shape how investment and underwriting functions coordinate around climate risks.
[1] Zurich (2021). Zurich's approach to climate change. Retrieved from https://www.zurich.com/en/about-zurich/sustainability/climate-change [2] Moody's (2020). Climate change and the insurance industry: Key issues and emerging trends. Retrieved from https://www.moodysanalytics.com/-/media/article/2020/climate-change-and-the-insurance-industry-key-issues-and-emerging-trends/climate-change-and-the-insurance-industry-key-issues-and-emerging-trends.pdf [3] AIR Worldwide (2019). Global Dynamic Exposure Model. Retrieved from https://www.airworldwide.com/products-services/catastrophe-risk-modeling/global-dynamic-exposure-model [4] Zurich (2022). Zurich Risk Room. Retrieved from https://www.zurich.com/en/about-zurich/sustainability/climate-change/zurich-risk-room [5] Zurich (2021). Zurich's climate risk model. Retrieved from https://www.zurich.com/en/about-zurich/sustainability/climate-change/climate-risk-model
- Zurich invests in renewable energy projects and climate innovation, demonstrating an alignment between investment and underwriting functions focused on climate risk mitigation, as seen in their development of insurance products incentivizing climate-friendly practices.
- Zurich's use of sophisticated climate risk models and tools, such as the Zurich Risk Room and Advanced Catastrophe Modeling like the Global Dynamic Exposure Model, helps both underwriters and investment managers align their risk perspectives and priorities by providing a shared, dynamic risk visualization and evaluation platform.
