Presented by Vicki Mullen, Vice President, Client Management ANZ at the Pacific Regional Dialogue on Financial Management of Climate Risk (26-28 June 2017, Apia)

1. Swiss Re Global Partnerships:
Innovative Insurance Solutions for Sovereign Risk
Vicki Mullen
Vice President, Client Management ANZ

2. Swiss Re Global Partnerships | 2017
About Swiss Re
We make the world
more resilient
2
2016 Results USD
$3,558m Net income
$35,634 Shareholders equity
Over 150 years of experience in providing wholesale
re/insurance and risk management solutions
Founded in Zurich (Switzerland) in 1863,
Swiss Re delivers traditional and innovative offerings
in Property & Casualty and Life & Health
Sharing of ideas and insights with academia and
international organisations through the Swiss Re
Institute
Dedicated function for public sector solutions
‘Global Partnerships’

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"By the year 2020, Swiss Re commits to have
advised 50 sovereigns and sub-sovereigns on
climate risk resilience and to have offered
them protection of USD 10bn against this
risk."
Swiss Re CEO
UN Climate Summit
New York
23 September 2014
Swiss Re's commitment

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• First dedicated public sector team in the reinsurance industry
• Over 200 closed transactions since 2011 inception
• Pioneer in emerging and industrialised markets with global footprint
• Insurance, reinsurance and capital markets solutions on all perils
Ø natural disasters and weather risks
Ø pandemics and liability coverage
Ø preventative and parametric (index) solutions
Ø resilience bonds
The Pacific Region is covered by the ANZ Global partnerships team
Swiss Re Global Partnerships
“Engaging with the world allows us to find more robust solutions to common perils. There are
limits to what the insurance industry can achieve alone; some risks will require a broader
approach involving international and public institutions.… Together, we share our expertise to
help society create effective responses”

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Source: Swiss Re Economic Research & Consulting and Cat Perils.
0
50
100
150
200
250
300
350
400
450
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Not insured
Insured Losses
10-year moving average insured losses
10-year moving average total economic losses
National catastrophes USD billion @ 2016
Uninsured risk includes:
Public physical assets, emergency response, foregone
revenue, uninsured private assets, livelihood assistance and
rehabilitation of the poor
• No jurisdiction can fully protect against natural disasters, despite prevention and mitigation efforts
• Natural catastrophe risks (see model below) have direct and indirect cost that are not insured
• Other systemic risks include pandemic, casualty, disability and longevity risk, which are presently under / non insured
• Emerging risks include cyber, terrorism, environmental liability and class actions.
The public sector carries a growing burden of uninsured loss for
natural catastrophes
Regions Economic Loss
from natural events
Insured
Loss
Protection
Gap
Rounded USD bn % GDP USD bn USD bn
Asia 83 0.32 9 74
North
America
59 0.29 30 29
Europe 16 0.08 7 9
Oceania /
Australia
6 0.45 3 3
Latin
America
6 0.29 1 5
Africa 3 0.14 2 1
2016 Total 175 0.24
average
54 121

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National disasters are a large-scale economic risk, that can damage
sovereign creditworthiness
“Insurance confers benefits both before and after disaster strikes.
Beforehand, the underwriters [demand] better planning and
higher-quality, more resilient building from property developers
and city planners. Afterwards, insurance helps entire economies to
recover more rapidly.”
The Economist, 13 June 2015
"Major natural catastrophes have large and significant negative
effects on economic activity... However, it is mainly the uninsured
losses that drive the subsequent macroeconomic cost, whereas
sufficiently insured events are inconsequential in terms of
foregone output."
Working Paper No. 394,
December 2012
"Natural disasters can damage sovereign creditworthiness”
Storm Alert: Natural Disasters Can Damage Sovereign Creditworthiness,
September 2015
"Climate change is likely to be one of the global mega-trends
impacting sovereign creditworthiness…. Government budgets
could come under additional pressure as disaster recovery and
emergency support for affected populations is likely to fall on the
state in most cases.“
Climate Change is a Global Mega Trend for
Sovereign Risk, May 2014
"National and subnational governments can develop and implement
comprehensive disaster risk financing strategies to reduce risk and to provide
adequate and timely post-disaster support to strengthen financial resilience."
Investing in Resilience
"Finance Ministries play a pivotal role in DRM strategies [by] ensuring proper
fiscal management of disaster risks by anticipating potential budgetary impacts
and planning ahead to ensure adequate financial capacity and rapid release of
funds, thus enabling emergency response, reconstruction of public assets and
infrastructure, and targeted financial assistance."
Disaster Risk Assessment and Risk Financing
- A G20/OECD Methodological Framework
"States, (…) regional and international organizations should develop partnerships
to implement schemes that spread out risks, reduce insurance premiums, expand
insurance coverage and thereby increase financing for post disaster reconstruction
and rehabilitation, including through public and private partnerships."
Hyogo Framework for Action 2005 - 2015
"One way to mitigate the economic and ratings impact of natural disasters [on
sovereign creditworthiness] is catastrophe insurance."
Storm Alert: Natural Disasters Can Damage Sovereign
Creditworthiness, September 2015

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Risk transfer options
7
gap
Which risk?
Governments
Who carries
the risk?
Pooling
Insurance schemes and pools
to increase insurance penetration
Macro
Risk transfer solutions
for (sub)sovereigns to cover
their direct or indirect costs
Micro
Simplified products distributed
via aggregators such as
MFIs, NGOs, and corporates
Risk transfer solution
Businesses,
homeowners,
farmers
Public physical
assets
Emergency
response costs
Foregone revenue
Uninsured private
assets
Livelihood
assistance
Protectiongap
Individuals

8. Swiss Re Global Partnerships | 2017
Case studies
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Vietnam
Agriculture
yield cover
Pacific Islands
Earthquake and
tropical cyclone risk
Uruguay
Energy production
shortfalls
due to drought
India
Weather insurance
for farmers
Caribbean
Hurricane,
earthquake and excess
rainfall risk
Beijing
Agricultural risk
Turkey
Earthquake pool
Louisiana
Hurricane risk
Mexico
Earthquake/hurricane
and livestock risk
Bangladesh
Flood
insurance
African Risk Capacity
Government drought
insurance pool
Florida
Hurricane risk
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United Kingdom
Flood risk
Shenzhen
typhoon/rainfall
Thailand
Crop insurance
Heilongjiang
Multiperil disaster
risk
Innovative Public Private Insurance Partnership Initiatives

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Asia-Pacific: Pacific Catastrophe Risk Assessment and Financing
Initiative (PCRAFI)
Solution features
§ First-of-its-kind sovereign catastrophe risk transfer in the Asia Pacific
region
§ The PCRAFI offers parametric earthquake (including tsunami) and
tropical cyclone insurance policies to 5 pilot Pacific Island countries:
Marshall Islands, Samoa, Tonga and Vanuatu and Cook Islands
§ The policies provide immediate liquidity to participating governments in
the aftermath of a disaster with an approximate probability of 1 in 10
years
§ Insurance coverage provided to the 6 Pacific Island countries is about
USD 40m
§ Similarly to CCRIF, the swap payout will be triggered by the intensity of
the event (modelled loss approach)
Involved parties
§ World Bank, ADB, Japan MoF
§ Derivative placed by World Bank Treasury
Payouts to date
§ 2014: Kingdom of Tonga USD1.3m following typhoon Ian
§ 2015: Vanuatu USD 1.9m following cyclone Pam

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Caribbean Catastrophe Risk Insurance Facility (CCRIF)
Solution features
§ The CCRIF offers parametric hurricane and earthquake insurance policies to 16
CARICOM governments
§ The policies provide immediate liquidity to participating governments when
affected by events with a probability of 1 in 15 years or over
§ Member governments choose how much coverage they need up to an aggregate
limit of USD 100m
§ The mechanism will be triggered by the intensity of the event (modelled loss
triggers)
§ The facility responded to events and made payments:
Involved parties
§ Reinsurers: Swiss Re and other overseas reinsurers
§ Reinsurance program placed by Guy Carpenter
§ Derivative placed by World Bank Treasury
Payouts to date
§ 2010: Haiti USD7.7m (earthquake), Barbados USD 8.5m (hurricane), St. Lucia
USD 3.2m (hurricane), St. Vincent & The Grenadines USD 1.1m (hurricane),
Anguilla USD 4.2m (hurricane).
§ 2008: Turks & Caicos USD 6.3m (hurricane)
§ 2007: St. Lucia USD 418k (hurricane), Dominica USD 528k (hurricane).

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Caribbean: CCRIF Excess Rainfall Coverage
Solution features
• In July 2014, the CCRIF added a third peril to their program by offering excess
rainfall insurance to their members
• 12 countries purchased the coverage that triggers when the modelled loss
exceeds the defined country threshold
• Loses are determined based on 2-3 day rainfall totals and the country exposure
values
• Utilizes Kinetic Analysis Corporation’s (KAC) high resolution data that is a
compilation of satellite and ground observations
• Deductible for the CCRIF is USD 7m and Swiss Re provides reinsurance with a
limit of USD 35m
Involved parties
• Reinsurer: Swiss Re
• Product designed by: CCRIF, KAC and Swiss Re
• Calculation agent: KAC
Payouts to date
• Anguilla: USD 493k (Oct 2014) and USD 559k (Nov 2014)
• St Kitts and Nevis: USD1m (Nov 2014)
• Barbados: USD1.2m (Nov 2014)
• Belize: USD 260k (Aug 2016)
• Haiti, Barbados: XS wind USD 21.5m and Haiti, Barbados, St. Lucia, St.
Vincent & the Grenadines: XS rain USD 8m (Oct 2016)

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Mexico: MultiCat - Funding immediate relief efforts after
disasters
Solution features
§ Insured perils: Earthquake and hurricane
§ Payments to be used for immediate emergency relief after a disaster
§ Parametric catastrophe bond: USD 315m
§ Trigger type: Index
§ Earthquake: physical trigger (quake magnitude)
§ Hurricane: physical trigger (barometric pressure)
§ Time horizon: October 2012 – November 2015
§ Renewed cat bond launched through the World Bank’s MultiCat facility
and third cat bond for Mexico
Involved parties
§ Insured: Fund for Natural Disasters (FONDEN) of Mexico
§ Reinsured: AGROASEMEX S.A.
§ Arranger: World Bank Treasury
§ Swiss Re: Co-lead manager and joint bookrunner
Payouts to date
§ 2015: USD 50m after hurricane Patricia

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Solution features
• Solution supporting the Guangdong province to build fiscal resilience against Nat
Cat contingent liability
• Payouts to be used for disaster relief and post disaster reconstructions of property
and infrastructure
• Covered perils: tropical cyclone, heavy rainfall
• Parametric triggers:
o Tropical cyclone: typhoon track, wind speed,
o Heavy rainfall: precipitation
• Sum insured: USD 340 million for a first group of 10 pilot cities
• Time horizon: First implementation in 2016, cover to be annually renewed and
extended to more municipalities starting from 2017
Involved parties
§ Insured: 10 municipal governments in the Guangdong province
§ Government project team: Guangdong Ministry of Finance bureau (lead) and
members from CIRC, NDRC, MoCA, CMA*.
§ Local insurance partner and lead insurer: PICC
§ Sole product designer and reinsurer: Swiss Re
§ Meteorological measures provided by Guangdong Climate Center
Payouts to date
§ October 2016: USD 3.2m after Typhoon Haima and heavy rainfall
(*) CIRC: China Insurance Regulatory Committee NDRC: National Development and Reform Committee
MoCA: Ministry of Civil Affairs CMA: China Meteorological Administration
China: Guangdong provincial government Nat Cat parametric
disaster relief hedge

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Case study China: Heilongjiang provincial government multi-
peril parametric disaster relief coverage
Solution features
§ Provincial government insures its fiscal contingent liabilities for
disaster relief in 28 counties who are classified as less poverty
resilient.
§ Payouts to be used for disaster relief and post disaster
reconstructions of properties and infrastructure.
§ Covered perils: Flood, excess rain, drought and temperature.
§ Parametric triggers designed to reflect significant yield losses of
agricultural crops based on satellite flood footprint index,
precipitation index, drought (temperature & precipitation) and low
temperature.
§ Annual contract
§ Sum Insured: USD 360m
§ Swiss Re has 80% quota share reinsurance
Involved parties
§ Reinsurer and product designer: Swiss Re
§ Calculation agent: China Meteorological Agency
§ Insured: Sunlight Agro Mutual Insurance

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§ The city of Toyama is exposed to riverine and coastal floods.
§ Toyama already is at the forefront when it comes to physical
flood adaptation measures, for instance with its investments in
river bank reinforcements, the construction of sabo dams and
underground rainwater storage facilities*. The city government,
however, cannot fully insulate itself against very extreme flood
events.
§ Swiss Re is currently in discussion with Toyama to support the
city in stabilizing the local governments catastrophe
response budget.
§ Flood is only one aspect – and we are also discussing on
earthquake and cyclone exposure – where Swiss Re is working
to help the City Government cover for such unforeseen natural
events through classic indemnity or innovative flood insurance
products.
Toyama (Japan): Flood disaster risk finance for the city
* Source: www.100resilientcities.org/

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Case study Kenya Livestock Insurance Program (KLIP):
Livestock protection for smallholder farmers in Kenya
Solution features
§ The Kenya Livestock Insurance Program (KLIP) is an innovative and scalable insurance
solution to help pastoralists bring their cattle through severe times of droughts.
§ The pilot was launched in October 2015 in the two counties of Wajir and Turkana and
protects livestock of 5,000 households. After the successful pilot, From 2016 onwards KLIP
will be extended across the whole country. KLIP is 100% funded by the Kenyan
government, making it free for pastoralists who are registered under the Hunger Safety Net
Program, and covers 5 tropical livestock units per household.
§ KLIP works as an index-based livestock insurance scheme. The Normalized Difference
Vegetation Index (NDVI) is an index of plant “greenness” or photosynthetic activity. Once a
certain threshold is reached pastoralists insured under the scheme automatically receive a
lump sum payout to provide livestock feed and water for their livestock which include cows,
goats and camels. It is not about compensating for the death of livestock, but to protect the
camel, cow or goat from the effects drought in the first place.
Involved parties
§ The Ministry of Agriculture sets the framework and provides the premiums.
§ Local insurer APA got mandated by the Government and entered into a
consortium arrangement with other local insurance companies who are willing to
participate.
§ The International Livestock Research Institute (ILRI), funded by the World Bank, did the
modelling work. A calculation agent will observe if a payout should take place.

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