Zurich CRO urges firms not to lose sight of climate risks

Immediate geopolitical threats are risking delays in building resilience to extreme weather events, warns Peter Giger, group chief risk officer (CRO) at Zurich Insurance. Talking to Commercial Risk after the launch of the World Economic Forum’s Global Risks Report 2025, Giger advised companies to take a long-term and scenario-based approach to risk, as the threat landscape becomes increasingly unpredictable. State-based armed conflict, extreme weather events and geoeconomic confrontation topped the list of immediate risks in this year’s Global Risks Report, which is supported by Zurich. Looking to the longer term, environmental risks, including extreme weather events, occupy the top four spots over the next decade. “The frustration I have is that the long-term risk landscape has been quite stable for years [led by environmental risks], but the focus remains – especially in the political and public arena – on fixing the short term. Companies act more with a long-term focus. But is it enough? I think resilience and transition are topics that many companies discuss, but only time will tell if the actions they take are sufficient,” said Giger. “This discussion will be at the heart of defining the survivors. Our economy is a series of trials and errors. You can ignore what is on the wall, but you risk being left behind if you are not prepared for the developments that are coming. That is not only true for resilience to climate change, but also for the [energy] transition that societies ultimately need to go through,” he added. Last year was another of elevated losses from natural disasters, as well as extreme weather events and new climate records. According to the World Meteorological Organization, 2024 was the warmest year to date. Natural catastrophe losses reached $145bn, the sixth highest on record, Aon’s figures show, with devastating floods in Spain, Central and Eastern Europe, North America and the United Arab Emirates. January 2025 continued the trend with a series of wildfires in California that are expected to cost insurers $20bn to $30bn. Rising natural catastrophe losses are due to a combination of factors, explained Giger. For example, populations continue to increase in areas exposed to hurricanes, wildfires and floods. At the same time, climate change is thought to be extending wildfire seasons and increasing the risk of flooding with more intense rainfall. “California wildfire is a classic example. No one should be surprised that an area burns occasionally, but is it related to climate change? The likelihood that it happens increases, but that is hard to prove. But if we accept that there is a trend [in natural catastrophe losses frequency], then we should keep in mind that mitigation and building resilience takes time. And that is what we are trying to point out. All the current noise puts us at the risk of not making the long-term investments needed to build resilience,” he said. Political factors are also impacting loss trends, according to Giger. For example, California’s insurance regulation has limited insurers’ ability to appropriately rate homeowners insurance for wildfires, removing an important incentive for investments in loss prevention, he explained. “The way California regulated insurance had suppressed the risk signals. If the market had its way, I don’t think we would have ended up in the same place, because the risks signals from insurance premiums would have come across loud and clear… It appeared as a low-risk undertaking to the owners, whereas in reality, insurance companies knew these were exposed areas and buildings,” said Giger. Without investment in loss prevention and mitigation, rising losses will increasingly impact insurance premiums, he warned. “If you think of increasing frequency and severity of events, that will drive up insurance premiums. If houses [are damaged in storms] every year, premiums will be significant as a proportion of the value of the property. It’s not so much a question of insurability, but an affordability issue,” he said. The insurance industry has an important role to play in encouraging resilience and risk mitigation, according to Giger. “At the end of the day, it is the policyholders that ultimately pay the claims. The insurance principle is that the many pay for the few. So if loss costs go up massively, it will be a drag on the economy. We are all better off if we try to contain as much as we can,” he said. Giger believes there needs to be a change in how governments, businesses and individuals view extreme weather risks and move towards building longer-term resilience. “At a political and also company level, climate change seems to be a handy excuse when something happens. There is not enough discussion as to why [an extreme weather event] has such an impact, because even extreme events do not need to have devastating impacts where proper resilience is built,” he said. The impact of flooding in Switzerland last summer, for example, could have been mitigated by flood defenses. However, previous proposals to build the defenses were dropped because of local opposition from farmers. Research from the Swiss Re Institute in 2024 showed the economic benefits of flood adaptation measures can be up to ten times the costs of post-disaster rebuilding. “We don’t need to talk about whether climate change is triggering such events. But what we need to talk about is why haven’t we built the resilience, which we knew we needed. It’s a difficult undertaking, and ten years after the event everyone has forgotten – it is no longer front of mind and other things appear to be more important. That is the real challenge we have,” Giger said. The importance of building resilience at an individual and company level will increase if international cooperation to tackle climate change weakens, according to Giger. The Global Risks Report warns that deepening divisions and increasing fragmentation are reshaping international relations, which calls into question whether existing structures can tackle complex global risks such as climate change. In the short term, 89% of experts polled for the Global Risk Report 2025 expect an unsettled, turbulent or stormy global outlook over the next two years, rising to 92% for the ten-year horizon. The levels of negativity reflect skepticism that current societal mechanisms and governing institutions are capable of navigating and mending the fragility generated by the risks we face today, the WEF said. “There is a growing risk that the cooperation element that would support a timelier tackling [of climate change] is not happening. We have the Paris Agreement, but I am not sure how many countries feel bound by it. So counting on that might turn out to be betting on something that will not happen,” said Giger. Organisations should balance short- and long-term thinking, and consider the risks they want to accept and those they want to mitigate across various scenarios, he continued. “You need to think in different scenarios, which might have quite different outcomes. The question is always: are you prepared to live with the outcome of a scenario? And if it has a certain likelihood and you are not prepared to live with it, then what could you do about it?” said Giger. “It is often the long-term thinking and the thinking in scenarios where we fall short of. We think today’s world is a good benchmark for the world in ten years, and it is not... You need to install processes that force the forecasting of scenarios and enable people to consider different futures, and not just follow current trend lines. If you think back ten years ago, not many people would have expected us to be where we are today,” he said. Climate is a particularly challenging risk to predict, according to Giger. Second only to extreme weather events, biodiversity loss and ecosystem collapse was ranked as the second-biggest risk over the ten-year horizon in the Global Risk Report 2025. “There will not be a discrete development over time. The real risk is that eco-systems collapse, and you go beyond the point of no return, and the world will be a very different place… But our thinking is often ill-prepared because we like to take the trend of the last few years and project into the future,” said Giger. Companies will also have to invest in expertise to better understand complex risks like climate change and the energy transition, according to the CRO. “In the end, this is a people business. You need the people that are able to understand the systemic environment that the company operates in, and are able to develop meaningful scenarios for how these systems might develop and evolve, and understand the implications. You need people that are creative enough, and who can think outside the box. In the box, it is only possible to pursue the current trend,” he said. “Risk management is a lot more than governance and process. Risk management requires a deep understanding of the business and an ability to engage business leaders in these processes so that you have appropriate discussions. A lot of this is about building awareness and thinking about what can happen. Once you get in the scenario thinking, you naturally come to the conclusion in terms of risk tolerance and mitigation,” he said.

Zurich CRO urges firms not to lose sight of climate risks

Current noise ‘puts us at the risk of not making the long-term investments needed to build resilience’

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