Natural catastrophes and climate risk

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Natural catastrophe risk has always been central to the SST, which requires insurers to model losses from storms, floods, hail and earthquakes. In Switzerland, insurance against natural hazards other than earthquakes is compulsory for buildings in most cantons. In nineteen cantons, including Basel-Stadt and Basel-Landschaft, it is provided by cantonal building insurers with a monopoly, while private insurers cover buildings in the remaining cantons through a pool with uniform premiums and conditions.¹ The cantonal building insurers fall outside FINMA's remit and are supervised by their cantons. Earthquake risk is largely uninsured in Switzerland, a gap that Basel, which suffered one of the most destructive earthquakes in Central European history in 1356, feels particularly keenly. The political debate on this gap, which includes recurrent attempts at a federal solution and a contingent liability model debated since 2023, is discussed in Chapter I.

Climate change has added a new dimension to natural catastrophe risk. FINMA expects insurers to identify, assess and manage climate-related financial risks, both physical risks, such as more frequent and severe weather events, and transition risks, such as losses on investments in carbon-intensive industries. Since 2021, the larger insurers have been required to disclose climate-related financial risks.² The new circular on nature-related financial risks extends these requirements to the integration of climate and other nature-related risks into governance, risk management and scenario analysis. Status to be verified. For reinsurers such as Swiss Re, which publishes extensive research on natural catastrophes through its sigma series, climate risk is both a business opportunity and a challenge to the models on which pricing and capital requirements depend.³

Notes

On the system of cantonal building insurance (kantonale Gebäudeversicherungen) in nineteen cantons and the private Elementarschadenpool in the other cantons (the so-called GUSTAVO cantons), see the Association of Cantonal Fire Insurers (VKG) and the Swiss Insurance Association. Number of cantons to be verified. ↩
FINMA Circular 2016/2 as amended with effect from 1 July 2021 (climate-related disclosure for insurers of supervisory categories 1 and 2); FINMA Circular 2025/3 "Nature-related financial risks", in force from 2025/2026 with transitional periods. Numbering and dates to be verified. ↩
Swiss Re Institute, sigma reports on natural catastrophes (annual), and Swiss Re's climate-related disclosures. To be verified. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.

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Dr Alexander Ressos, TEP

Rechtsanwalt/Attorney-at-Law

I am a Swiss attorney-at-law and also admitted as a solicitor in Hong Kong and in England & Wales, with almost 25 years of experience.

Together with my multilingual team, including Chinese, Japanese, Korean, Russian, Ukrainian and French native speakers, I advise companies and their owners from around the world on the full range of banking, corporate, commercial and tax law matters in Switzerland, including international tax planning, fiduciary services, and legal family office services including immigration & relocation or real estate investments. My practice has a particular focus on clients from growth and frontier markets in Greater China, Central Asia and the Caucasus, the rest of Asia, the Middle East, Africa and Latin America, and I equally advise clients from Europe and North America. Through an affiliated Swiss trust company, we also take care of the incorporation and ongoing administration of their companies and other structures, including accounting, tax returns and corporate secretarial services, and I serve as a professional director where required. With the support of a network of first-class cooperation partners, I also implement solutions worldwide.

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Natural catastrophes and climate risk

Notes

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