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FORTUNE.COM // NOVEMBER 2019
the value of massive sunk investments could
shrivel, as regulators and investors get serious
about slashing carbon emissions. The profit-
ability of fossil-fueled power plants, of coal
mines and oilfields, of factories that make
internal- combustion-powered cars—and of the
companies behind these assets—could plum-
met as society decarbonizes. If the shift reached
meaningful scale, trillions of dollars worth of
infrastructure could lose value, devolving into
what investors call “stranded assets.”
There are signs this already is happening.
Coal stocks have tanked, in large part because
of the increasing cost-competitiveness of lower-
carbon fuels: The Dow Jones U.S. Coal Index is
down 95% from its 2011 peak. In January, the
CRO Forum, a Netherlands-based organization
of chief risk officers of big insurers, warned of
new sorts of climate-related claims that may
confront insurers. Among them: hefty bills
from corporations they insure against lawsuits.
At this point, legal action charging that big car-
bon emitters contributed to climate change or
failed to react sufficiently to it is just beginning
to emerge. But, as the insurance group noted
ominously, the science of pinning climate blame
on corporate polluters “is developing fast.”
The other threat is “physical risk”: that warm-
ing temperatures could trigger enough sea-level
rise, storm intensification, and drought-fueled wildfires to wipe
vast sums off corporate balance sheets. A Swiss Re Institute chart
tracing damage from recent threats looks like ascending peaks in
the Alps: Hurricane Sandy in New York in 2012, Hurricane Harvey
in Texas and Louisiana in 2017, and the apocalyptic California fires
of 2018. (See the graphic below.) By mid-century, observers say, the
damage could make what has emerged so far look quaint. In the
U.S., the CRO Forum declared, some coastal and forest-fringe areas
“are already on the edge of uninsurability.”
Such worries are spurring some of the global economy’s biggest
players to act. This year alone, Norway’s sovereign-wealth fund, the
world’s largest, said it’s divesting its holdings in pure-play oil-and-
gas exploration and production companies, and the Bank of Eng-
land asked U.K. insurers to assess how climate change might affect
their returns. In the past couple of years, many of the world’s big-
gest insurers and reinsurers—among them Germany’s Allianz and
Munich Re, France’s AXA and SCOR, and Chubb, whose biggest
market is the U.S.—have announced they are pulling back their
coal exposure, either in their investments, their insurance books, or
both. Few, though, are taking steps as deep as Swiss Re. Whether
those steps end up protecting Swiss Re from cataclysmic exposure,
as the company hopes, or handing chunks of its market share to
less-climate-concerned rivals, as some executives admit they fear,
will depend on how skillfully Swiss Re negotiates this transition.
Death and destruction are Swiss Re’s bread and butter. But what2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
SEPTEMBER 11
ATTACKS
20
0
40
60
80
100
120
$140 billion
HURRICANES
HARVEY,
IRMA, MARIAHURRICANE
SANDY
CAMP FIRE,
TYPHOON
JEBI
HURRICANES IVAN,
CHARLEY, FRANCES
HURRICANES
IKE, GUSTAV
INSURED CATASTROPHE LOSSES (2018 dollars) EARTHQUAKE/TSUNAMI WEATHER-RELATED DISASTERS MAN-MADE DISASTERS10-YEAR
MOVING
AVERAGE
JAPAN, NEW ZEALAND
EARTHQUAKES,
THAILAND FLOOD
HURRICANES
KATRINA,
RITA, WILMA
SOURCE: SWISS RE INSTITUTE
RACING A RISING TIDE
RISING SEAS AND COSTS Hurricanes and other weather events linked to climate
change have helped fuel an ominous increase in losses from natural disasters.