Swiss Re expects more cascading effects from natural disasters

The scene after an earthquake in Japan in January. According to Swiss Re, "as soon as critical infrastructure and supply chains are affected, the losses can become immense". Keystone

Natural catastrophes do not only cause extensive damage to property and claim lives, reinsurer Swiss Re said in a report on Wednesday.

They also pose further risks due to so-called cascading effects, such as interruptions to the water supply, damage to power grids or disruption to transportation networks.

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If power outages paralyse entire production lines, production comes to a standstill, materials spoil and deliveries are delayed, according to the Sonar study published by Swiss Re on Wednesday. “As soon as critical infrastructure and supply chains are affected, the losses can become immense.”

The reinsurer also sees further risks in the decreasing resilience of supply chains. Following the disruptions caused by the Covid-19 pandemic, the security of supply chains has become a priority for companies. In the meantime, however, cost savings have come to the fore again.

+ Storms and floods cause massive damage worldwide

“Not only has cost pressure increased, but the risks to supply chains have also increased, as the crisis in the Red Sea shows,” says Swiss Re.

The reinsurer expects key transportation routes around the globe to become more uncertain due to the more volatile geopolitical situation, but also the increase in extreme weather events, economic uncertainty and increased cyber and technology risks.

Underfunded healthcare system

The Sonar report identifies a further risk in the underfunding of the public healthcare system. This could lead to higher morbidity and mortality rates, particularly in a future pandemic. Increased absenteeism due to illness and staff shortages also put a strain on the economy.

+ How to fix Switzerland’s costly healthcare system

“The underfunding of the healthcare system and its effects are worrying in countries at all income levels,” the report states.

This is the 12th edition of Swiss Re’s Sonar report. The current edition highlights a total of 16 new risks and their potential impact on the insurance industry and society.

Translated from German by DeepL/ts

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