The advancement of climate change and increased frequency of extreme events have challenged the global insurance and reinsurance industry. In Latin America, the combination of higher risk exposure and low insurance penetration expands the so -called “gap (gap) protection ”.
The assessment is from Kaspar Mueller, CEO for Latin America at Swiss Re, one of the world’s largest reinsurance, in an exclusive interview with Infomoney.
According to Mueller, climate risks are “divided” in two ways in the insurance market – especially in the insurance branches of property and liability:
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- you primary riskswhich contemplate earthquakes, hurricanes and typhoons; and
- you secondary risksas floods and forest fires.
According to the executive, the events of the second type are increasingly recurring in Brazil. “And then it is obvious: we have more dry, so we have more forest fires. And we have more floods in Brazil – but before that, in Petrópolis, the great climate event was a landslide. These are only two examples – and all happens with a higher frequency,” he said.
He recalls cases of extreme rainfall in Petrópolis (RJ) in 2022 and Rio Grande do Sul last year as emblematic examples of tragedy associated with failures in climate risk management.
Also read: With more frequent events, climate change are expensive and ask for urgent actions
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Extreme events grow and expand uncertainties
Mueller points out that the financial impact of natural disasters is on the rise, with claims (occurrence of the risk provided for in the insurance contract) consistently surpassing the $ 100 billion mark in the last 5 years, according to studies conducted by Swiss Re.
“Last year, it was $ 134 billion. In 2025, with fires in California alone in January, we started the year estimating $ 40 billion in losses. That is, it’s already a big slice even before the hurricane season begins or big earthquakes happen.”
For him, climate change changes not only severity but also the predictability of risks – which directly affects insurance pricing and the capital structure of reinsurance.
“In our business, although we are here to protect societies, we can only do this if we protect ourselves too. If we run out of money to pay claims, we will not be able to protect societies. So we are very cautious, for example, with multiannual climate contracts. We prefer annual contracts,” says Mueller.
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He argues that shorter contracts allow insurers to incorporate the latest data on climate events such as floods and fires (harder to predict) in their risk analysis.
Learn more: How can the insurance sector reduce the damage of climate change?
Despite increasing exposure, insurance penetration remains low in countries such as Brazil – where only 30% of the automotive fleet and only 17% of residences have insurance.
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“The market always says that Brazil is not a country of disasters, but this is not true. Floods happen every year and unfortunately kill people. Still, society as a whole does not seem so willing to pay for protection against this risk.”
Lack of public policies increases the risk
For Mueller, this resistance has cultural and economic roots, but also relates to the absence of demand from institutions such as banks.
The lack of insurance against catastrophic events opens the protection gapterm used in the sector to describe the difference between economic losses and insured losses. According to the CEO, Rio Grande do Sul had a gap Huge, with the economic losses much larger than the insured losses, showing the space that is still for insurance to advance.
Translating into numbers, the tragedy in the state of Rio Grande do Sul caused by the 2024 fall rains generated estimated losses of $ 89 billion, but only $ 6 billion were covered by insurance, according to sector data.
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Read more: Indemnity claims add up to R $ 6 billion in RS, Brazil’s largest climate claim
This represents a 93%protection gap, highlighting the mismatch between financial losses and what is actually compensated by the contracted policies (insurance contract), a recent study by SUSEP (Private Insurance Superintendence), a federal agency that regulates and oversees the insurance market in the country.
The executive also criticizes the absence of structured public policies. Although there are successful initiatives in countries such as Mexico and the Caribbean islands, which protect critical infrastructure with support from reinsurance, in Brazil the advance is shy.
More climate resilience
In its analysis, there is a lack of concrete proposals and the government’s willingness to invest today in something that will only bring return in the future. According to Mueller, the ideal would be the creation of public-private partnerships to protect essential assets from society. “We strongly believe that there are certain risks that governments should consider with a long -term vision,” he says.
Regarding the correlation between politics and climate, Mueller directly avoided commenting on the impact of the Brazilian electoral scenario (which elects a new president next year) in the market, but acknowledged that the (insurance) sector is highly regulated, and political changes directly impact the business environment.
“The government has great influence on regulators and laws – so it is evident that different policies generate different impacts. In the long run, this is very relevant,” he notes.
He recalls that events such as pandemic and climatic risk intensification have put the sector to the test and increasingly require robust predictive models.
Despite the challenges, the Swiss Re CEO believes in the potential of Latin America, especially Brazil, who considers a priority market. “The country has not yet fulfilled all the promise it has generated a decade ago, but it has enormous potential. We want to be here to support this growth and increase the resilience of societies in the face of climate change.”