That figure is 27% above the 10-year average, according to a recent report by Gallagher Re, which estimates that natural perils – from wildfires in Los Angeles to flooding in Valencia to deadly landslides in Southeast Asia – created direct economic costs of $417 billion in 2024. Private and public insurance entities covered 37% of that total, with the US alone accounting for $117 billion in insurance losses.

Rather than hiking premiums or pulling out of high-risk markets completely, the industry aims to minimize future losses by working with reinsurers, brokers, and other industry experts while reaching out to local governments and environmental groups, climate and technology experts, and even international agencies.

“Pulling out of a market is not a decision that anyone is going to make lightly.”

Dale Porfilio, Insurance Information Institute

“No one country is going to solve this problem on its own,” says Maryam Golnaraghi, director of climate change and environment at The Geneva Association, a Zurich-based think-tank for the global insurance industry. “The solution is going to take all of society working at different levels and different stages to develop incentives and solutions.”

This month, the association is releasing a report based on nine months of collaborative effort between the industry, academic institutions, climate-risk modelling firms, mortgage and lending regulators, and international organizations. The document, which will lay out methods to safeguard access to home insurance amid the global surge in extreme weather risks, is focused on developed economies with mature insurance markets: Australia, Canada, the EU, Japan, the UK, and the US.

Financials at global insurers/reinsurers remain strong. Global reinsurer capital increased by $45 billion to $715 billion last year while reported equity rose by $38 billion to $600 billion, continuing a recovery that began in 2022, according to Aon, a global professional services firm.

“Higher retentions and tighter coverage again insulated reinsurers from the worst effects of the elevated natural catastrophe activity in 2024,” said Mike Van Slooten, head of market analysis for Aon’s reinsurance solutions in London, in a recent Aon report.

As part of the collaborative effort to keep the industry financially resilient, some industry stakeholders are zeroing in on climate risk solutions, says Peter Miller, president and CEO of The Institutes, a not-for-profit in Malvern, Pennsylvania, with expertise in risk management and insurance.

Global reinsurers, for example, are investing heavily in climate research and modelling capabilities to assist insurance brokers in developing specialized climate advisory services that help clients understand and mitigate their exposures. Industry associations are creating frameworks for climate risk disclosure and management while insurance technology firms are introducing data analytics and parametric products for climate perils. And ratings agencies continue to weave climate considerations into their assessment methodologies.

“The industry recognizes climate change as a systemic risk that requires significant adaptation,” says Miller. “Continuing business as usual would lead to market disruptions and coverage gaps. Industry leaders view climate change as a transformational force rather than just another risk factor. They’re investing in capabilities to understand, price, and manage climate risks while engaging with policyholders on adaptation measures.”

In the wake of a natural disaster, insurers are the “financial first responders,” says Dale Porfilio, chief insurance officer at the Insurance Information Institute (Triple-I), an insurance trade association. “We are here for that risk transfer and to make people whole.” Yet, the greater frequency and severity of natural disasters—from floods to hurricanes to wildfires—along with increased repair and rebuilding costs is spurring insurers in the US to collectively reassess their risk appetite for residential property.

“Can we continue to insure every single house in the way that we once did, based on the cost and the relative risk?” says Porfilio. As a risk-based product, policyholder premiums must reflect what losses are expected to be in the upcoming year. “Pulling out of a market is not a decision that anyone is going to make lightly.”

State insurance commissioners in the US, who can be elected officials, direct greater scrutiny to the pricing of residential property, he adds. Homes located along coastlines and waterways and in hills and canyons frequently carry greater exposure to natural disaster risks than commercial properties, which tend to be located inland and closer to central transportation areas.

Risk managers and insurance brokers are reaching out directly to these corporate clients with new products and expertise to help them understand climate adaptation and manage their risks.

“We help organizations become resilient to extreme weather, now and for the future, by leveraging our suite of climate adaptation capabilities,” says Nick Faull, London-based head of climate and sustainability risk at Marsh, a global insurance broker and risk management advisor. Marsh counsels executives to consider extreme weather events on two levels: assets and systems.

“How will assets, including buildings, people, and operations as well as emergency response processes, be impacted?” Faull says. Secondly, managers must determine how extreme weather events will impact the broader organization: “particularly through the impacts on suppliers but also on critical infrastructure, resources and ecosystem services, customers, and on the communities in which it operates. In addition, what impact will be changing regulations and capital provider expectations have?”

By comprehensively monitoring their supply chains—Marsh’s parent, Marsh McLennan, offers an AI-powered tool called Sentrisk—companies can better prepare for extreme weather events. As an example, Faull cites a UK company that learned a supplier, deep in its supply chain in Southeast Asia, was at high risk of flooding, leaving the company exposed to significant disruption.

“With better information, the company is able to build resilience into its supply chain to avoid future disruption,” he says.

In collaboration with Floodbase, a parametric flood expert, and Swiss Re Corporation Solutions, Aon launched a parametric insurance solution in February that promises to address and mitigate losses from hurricane-related storm surges along the US coast using a range of meteorological data sources. Rather than aligning pay-outs to traditionally adjusted physical damage, like an indemnity insurance product, Aon bases them on water height. Policyholders can select the level of pay-out they require for a certain level of storm surge, with a rate calculated accordingly. The proceeds can be used for any financial loss associated with the event, addressing a substantially broader set of exposures than traditional insurance.

Hurricane Helene was the single most devastating natural catastrophe of 2024, according to Aon’s 2025 Climate and Catastrophe Insight report, responsible for approximately $75 billion in economic losses, mainly due to US inland and coastal flooding. A parametric solution helps bolster existing levels of cover and provides liquidity, says Cole Mayer, head of parametric solutions at Aon. Used as a standalone product or with traditional and non-traditional insurance policies, it offers corporates more comprehensive protection, he says, noting that for some hurricane events, storm surge damage can account for more than one-third of the total loss cost. The industry is also turning to conservation groups and governments as key collaborative partners.

In Canada, Nature Force, which includes 15 insurers and Ducks Unlimited Canada, has invested in wetland restoration to reduce flood risk in urban communities, says Golnaraghi. Local and state governments can focus on risk-based land zoning, enforce updated building codes, and promote fortified building certification. Federal and national governments, in turn, can lay down standards of resilience that local and state officials must meet in their post-disaster aid programs and place a priority on constructing large-scale resilient infrastructure.

“Governments at all levels are crucial in scaling local resilience and collaborating with the insurance industry,” Golnaraghi says. “Together, they can develop a shared vision for hazard-prone areas where insurance challenges are rising due to an increase in unmitigated risks linked to growing exposure and vulnerability.”

For Italy’s second largest bank—after Intesa San Paolo—this is the first deal since veteran banker Andrea Orcel became the CEO in 2021, while the purchase of the stake in Alpha Bank would be, if fully approved by the Greek authorities, the first investment in a Greek lender by another European bank since the financial crisis.

UniCredit is a large player in central and Eastern Europe with presence in Germany, Austria, Poland, Croatia and Romania. It also still owns a lender in Russia.

UniCredit will pay €300mn in cash for Alpha Bank’s Romanian operations, and merge them with its local units. Alpha Bank will keep 9.9% of the new Romanian entity; UniCredit will have the remainder. According to UniCredit, the deal will add euro 100 million in net profit to the Italian bank and will create the third largest lender in Romania.

 “For the time being and for the foreseeable future this is the best alliance we could have struck” said Orcel, who according to market analysts has been under pressure for a while to announce a growth deal. He denied a strategy to expand further into the Greek bank. “(It) makes sense to seal this partnership with the acquisition of a significant, but limited, stake in Alpha… that is what it is, no more,” Orcel told analysts on October 22.

A 9% stake in Alpha Bank is worth around euro 270 million based on market prices, analysts said but the offering price to the Hellenic Financial Stability Fund (HFSF) was not disclosed. The purchase will make the Italian lender the largest stakeholder in the Greek bank. UniCredit said that if the offer to the HFSF fails, it will buy up to 5% of Alpha on the market in the next two years. UniCredit also plan to distribute its own asset management products to the 3.5 million clients in the Greek bank.

It will likely be a long and contentious haul over the next few years before registered public companies must enhance the way they report climate-related financial risks and metrics to the US Securities and Exchange Commission.

The federal agency’s proposed climate-related disclosure rule, issued on March 21, follows its 2021 request to at least 43 companies for details on the significant risks emerging from the changing climate. Those inquiries—the most over the past 14 years, asked about a range of risks—from hurricanes to litigation to regulatory compliance costs. It followed the federal agency’s September 2021 publication of a list of requests it sent to executives related to a 2010 guidance document on climate-change disclosures.

Companies and industry associations will have at least until May 20 to lay out their concerns—whether on costs, feasibility or liabilities—with the requirements laid out in the giant 506-page document. If the rule kicks in by year’s end, as the agency wants, the first company reports would be due in 2024, covering data from the 2023 fiscal year.

Yet legal challenges are expected once the rule is finalized, particularly on the agency’s statutory authority to enact comprehensive climate disclosure regulations without approval from Congress.

In the proposal, the SEC notes that disclosures related to climate change have generally increased over the past dozen years. Yet the content, detail and location vary, whether in official reports filed with the commission or sustainability reports found on company websites. The current disclosure system is not turning out consistent, comparable and reliable information. 

Amber Fairbanks, portfolio manager at Mirova US, a sustainable-investment manager affiliated with Natixis Investment Managers, says investors are helped by comprehensive disclosure requirements that make it easier to compare data across companies. “We think it is important that there be regulation to standardize ESG data,” she says, “particularly given the amount of greenwashing that’s prevalent at the moment.”           

Global Finance: Will the financial sector be able to provide enough liquidity to keep businesses from collapsing?

Viral Acharya: There has been a huge wave of drawdowns of prearranged credit lines by large and small firms in this fog of economic uncertainty. The drawdowns are involuntary for the banking system, as the terms have been prearranged. Not all corporations accessing cash are necessarily in need of liquidity. Some just want to hoard the liquidity. My concern is: Can banks still afford to serve as financial intermediaries efficiently for households and small businesses?

If small businesses do not have the same access to credit as large corporations, the system must ensure them a soft landing. Large corporations have a larger market value, but small businesses provide a much bigger percentage of jobs to the economy. Small businesses cannot access bond markets. How do we design things right for small businesses?

GF: What do you think of the Paycheck Protection Program, the US Small Business Administration plan to help small businesses?

Acharya: Unfortunately, the program, issued in two tranches of $349 billion and $320 billion, is not targeting the sectors most in need. Construction, agriculture and restaurants—these jobs cannot be done from home. It is a free-for-all. Everyone in small business is applying for these loans. Given the program’s limited size, even for a country as rich and well trusted in bond markets as the US, it would have made good sense to direct the money to where the bang for the buck would have been highest—sectors in which working from home is not easy.

GF: What is the risk of deflation?

Acharya: The risk of deflation is quite severe, because the economic shock is very large—much bigger than the global financial crisis. The shock is not accelerating primarily through the financial sector. It is a direct, real hit to the cash flow itself of the economy, with things shutting down.

I worry about three things: the fog of uncertainty as to how long the very large shock to the real economy will last; the likely staggered revival to their precorona zone of different countries; and stretched corporate balance sheets, in terms of borrowings. While households and banks had deleveraged over the past 10 years, corporates and governments took on more debt.

The size of public sector balance sheets in developed economies will increase even more. These will be important deflationary forces. To repay these huge quantities of debt, governments will have to raise taxes down the line. Deflation is therefore a significant risk that has to be put on the table.

GF: Are governments in emerging markets providing enough business and social support?

Acharya: Many of these governments have not run their fiscal situation very well, running up huge off-balance-sheet-liabilities. When they have to spend on a true humanitarian crisis, they don’t have a fiscal buffer for spending without facing sovereign downgrades. Some countries already have been downgraded by a notch or more. And several others are on the verge of negative outlooks or further downgrades.

If governments undertake direct expenditures, it would add to the bottom line in official statistics and increase their measured liabilities. They are more likely to use credit guarantees through banks to their bottom line. This way, they can postpone recognition of their fiscal support. Many people are disappointed with the fiscal relief measures of emerging markets. But governments’ fiscal space has been used up in connected lending, populist agendas and inefficient subsidies. They are worried that if public indebtedness rocks their bond markets and external sectors, they could have financial instability problems on their hands. Hence, fiscal compression—as in reorienting expenditures from inefficient ones to immediate needs—and rebuilding credible commitment to fiscal consolidation in the post-pandemic era, are both the needs of the hour.

More than 35 global bankers from nearly a dozen countries turned out for the Global Finance Private Bank Awards 2020 at the Harvard Club in New York City in early March. The wealth management specialists traveled from South America, Asia and Europe to meet fellow bankers in North America and to celebrate Global Finance’s recognition of their expertise and capabilities.

This year, J.P. Morgan captured the top honor as Best Private Bank in the World. Singapore-based DBS Private Banking won three awards: Best Private Bank in Emerging Markets, Best Private Bank for Digital Client Solutions and Most Innovative Private Bank in the World. Citi Private Bank was awarded the Best Private Bank for Net Worth of $25 Million or More, while Northern Trust took the award for Best Private Bank for Family Office Services. BMO Bank seized the category of Best Private Bank for Entrepreneurs.

To handle the challenges created by this year’s uncertain macroeconomic environment, the award winners use highly skilled private bankers—along with a wide range of investment products and the right mixes of digital expertise and personal attention—to satisfy their clients’ expectations.

Dayla Kohen, senior vice president of the Private Banking division at Akbank in Istanbul, says Akbank is intent on bringing the next generation of existing clients into the Turkish bank’s fold. Its Next Generation program, for example, helps young people in their late teens and early 20s learn about the responsibilities associated with protecting their family assets and transferring these assets from generation to generation.

The Global Finance award winners are also successfully meeting their customers’ increasing demand for socially responsible investments. This expectation is escalating as millennials (the generation born between 1981 and 1996) in all countries accumulate more wealth and look for their expanding portfolios to be managed in a way that cares for the planet. As a result, private bankers are increasingly investigating how environmental, social and governance factors play into the investment products they offer their clients.

David Albright, head of Client Development for the global family and private investment offices at Northern Trust, says the bank offers a deep sense of service when meeting the long-term investing needs of its clients. Socially responsible investing is becoming increasingly important to them. “Doing well by doing good,” he says. Chicago-based Northern Trust is one of the oldest financial institutions in the US.

Pál Kovács, chief executive officer of CKB Montenegro, says his bank has carefully crafted a client relationship powered by the technological capacity that lets clients monitor their investments on a 24/7 basis, along with personalized service. “People are traveling. They are working abroad. They are in different time zones. Sometimes they are too busy to meet,” says Kovács, whose financial institution is part of the OTP Group. “We need to give them personal service and digital capabilities.”

Ranganathan Purushothaman, president of Edelweiss Financial Services in New York and executive vice president of the Edelweiss Group, says the Indian financial institution’s strong adherence to compliance and ethical business practices is an asset that attracts many clients.  “We are very strong on adhering to regulations as we offer wealth management opportunities,” said Purushothaman, who also heads International Compliance for the Mumbai-based group. He said the financial institution’s clients include many small businesses whose assets are expanding along with India’s wealth.

Sebastián Wenz, partner and Wealth Management manager at LarrainVial in Santiago, Chile, says the South American bank’s customers want well-diversified portfolios that tap into investments in local and overseas markets. Liquidity is also an important factor.

Alina Petropoulou, head of the Private Banking Kifissia Unit at Eurobank in Greece, says the success of a private bank is about creating the proper synergy for clients. These synergies include resilience, agility and innovation, said Petropoulou, noting that the word “synergy” stems from a Greek word (translating into “working together”).

After a reception and dinner, Joseph D. Giarraputo, Global Finance publisher and editorial director, again congratulated the group of winners. He acknowledged the pressure private bankers are facing with economic and political uncertainties, including global trade wars, a US presidential election, Brexit (the United Kingdom’s decision to leave the European Union) and the spread of the Coronavirus. “All of these factors put pressure on bank margins, and bank managers have to leverage their capabilities,” he added.

Global Finance Editor Andrea Fiano then presented the Private Bank Awards 2020 to the executives of the winning banks. 

Global Finance: What trends have you seen in the regulation of digital assets over the past several years?

Sarah Hody: It is complicated; the relationship between banks and technology companies and regulators is evolving everywhere. In the US, there is tension between federal regulators and the states. Right now there is state-by-state regulation of digital assets, and turf battles between states. The Office of the Comptroller of the Currency supports a fintech banking charter, which would create a nationwide standard. Looking abroad, in China, for example, it is difficult to know the status of regulatory markets. China has been going back and forth between outright bans and making some uses of cryptocurrencies permissible. Right now it seems more in the banned phase.

GF: Why is digital asset regulation so tricky?

Hody: In part, it is the question of how to categorize them. Digital assets are generally split into three categories: currencies, predominantly used for payments; commodities, which can include tickets; and securities, such as many of the initial coin offerings. A digital asset often represents a hybrid of more than one category. A digital ticket can be a commodity, but if you sell it far in advance, in order to finance the event for which you sell the ticket, and you let people resell it in the meantime, it looks a lot like a security. How do you regulate it? Securities and commodities regulators are currently grappling with scenarios like this. Regulators concerned with money laundering especially focus on the on- and off-ramps: Where assets are coming from and where they are going?

GF: Why aren’t financial institutions building crypto platforms?

Hody: Banks have intricate compliance obligations, so the lift it would take a bank to develop an adequate compliance program, and liability if the bank failed to do so, are not worth it.

GF: What is holding up massive adoption of blockchain?

Hody: User experience, speed and regulation. Regulatory uncertainty makes it hard for banks and companies to know how a given project will be overseen. Network speed is also an issue. Payments are now handled extremely quickly by the payment processing companies such as Mastercard. Why would Mastercard switch over to blockchain if the result is slower payment processing? Consumers want digital services to work well. When blockchain is being used, the average consumer won’t even know. For mass adoption, more innovation needs to happen with the technology’s infrastructure and on the business-to-business side.

GF: What are some of the more promising uses for blockchain?

Hody: It is being used now by players in gold [mining] supply chains—miners, refiners, logistic suppliers, vaults. It’s being looked at for corporate accounting systems; a company could build in controls for financial audits that would make it difficult for an employee to be a bad actor. Governments are looking at blockchain for digital identity—passports and driver licenses. Eventually, a person’s age could be verified by a digital ledger that accesses information stored by the birth hospital—without revealing extra data, like an address, the way that showing a driver license does.

GF: What do you think of JP Morgan Chase’s new JPM Coin?

Hody: It’s a natural evolution. It is a good sign because the blockchain industry needs to grow up, and banking involvement is a step toward maturity. Even though CEO Jaime Dimon was critical of cryptocurrency, the bank had a blockchain research division. For customers, JPM Coins may not seem any different than any other dollar-denominated balance a customer already can hold with JP Morgan. The key benefit will be that it lets clients move large amounts of dollars within the network, at any hour.

GF: What about the environmental impact of blockchain?

Hody: It should become less of an issue for networks using proof-of-stake, rather than proof-of-work, models. Proof-of-stake models amount to something like cloud mining.

Global Finance (GF): “Globalization” is not well-defined. What does it mean for you at the Center for the Globalization of Education and Management?

Steven A. Altman: We think of globalization in terms of flows of trade, capital, information, and people between countries. By focusing on flows, we can measure globalization based on hard data. Our center’s director, Pankaj Ghemawat, and I co-author a biennial report on the state of globalization called the DHL Global Connectedness Index. The next edition will come out this fall.

GF: What did you find in the latest report?

Altman: The world’s overall level of globalization declined during the 2008 financial crisis, but surpassed its pre-crisis peak in 2014. On depth, which compares a country’s international flows to its domestic economy, the most-connected economies are Singapore, Hong Kong SAR (China), Luxembourg, Ireland and Belgium. On breadth, which evaluates the extent to which international flows are distributed globally, the leading countries were the UK, the US, the Netherlands, South Korea and Japan.

GF: What is the most interesting finding?

Altman: That flows across borders are far smaller than people think. Just 3% of people live outside the countries where they were born, 5% of phone-call minutes are international, foreign direct investment is 7% of gross fixed capital formation, and about 21% of value-added around the world is exported. On average, people estimate that the international proportion of these kinds of flows is five times greater than it actually is.

GF: What does this mean for policymakers?

Altman: Globalization makes a handy scapegoat, but many problems commonly blamed on international flows really have domestic roots. Consider income inequality. The US ranks first among major advanced economies on inequality but last on imports as a percentage of GDP. That juxtaposition supports the view—reinforced by many studies—that trade has a smaller role in inequality than technology and domestic economic policy. Our general prescription is to couple international openness with domestic policy interventions that address globalization’s side effects. Our research also debunks the myth that distance no longer matters, highlighting the value of strong links to neighboring countries. A true view of distance effects implies the EU will still be the UK’s top market even after Brexit, and Canada and Mexico will remain key partners for the US regardless of what happens to NAFTA.

GF: How could these data impact business strategy?

Altman: It shows there is still a great deal of room for companies to create value across national borders. But because markets are less integrated than many people think, managers often underestimate how much they need to adapt to cross-country differences.

GF: What’s the impact on public/private-sector power relations?

Altman: Countries still have a great deal of power over companies. While companies choose where to locate, they have to follow the laws and regulations in those locations. Look at the EU’s new data protection regulations.

GF: With protectionism rising, what are the risks to trade?

Altman: We’re watching this very closely. Trade grew faster in 2017 than in any year since 2011, but escalating tariff threats in 2018 put future growth at risk. To help companies prepare for the possibility of a trade war, we’ve done some historical analysis. One of the key lessons was that trade may plummet but it will not perish. Companies need to be ready for a sudden disruption to supply chains or market access; but since trade does not dry up entirely during a trade war, they still need to pay close attention to international opportunities and threats.

At the time, she was working with human rights advocates and environmentalists as senior vice president of stakeholder relations at Danish healthcare company Novo Nordisk. This September, Kingo made the 4,000-mile trip across the Atlantic to take the helm of Global Compact. The United Nations initiative aims to encourage businesses around the world to voluntarily align their strategies and operations with the Compact’s 10 principles on human rights, labor, the environment and anti-corruption.

Kingo had been involved with Global Compact from the initiative’s earliest days. In her roles as chief of staff, executive vice president and executive management team member at Novo Nordisk, she helped lead the healthcare giant to the top of the pack on corporate social responsibility. Novo Nordisk has been putting out sustainability performance reports since 1994 and was one of the first companies to issue an environmental report. Many others have followed. Global Compact now has more than 8,000 company signatories to its voluntary initiatives. Indeed, it has become standard practice for companies to integrate the cost of environmental, social and governance issues—from reputational damage from a product recall to the environmental cost of an oil spill—into their financial statements.

Over the past 15 years, corporate social responsibility and sustainable development have become regular items on the agenda of corporate boards. They are also hot topics of conversation in executive suites and in the investment community.

As chief of staff at Novo Nordisk, besides handling human resources and corporate communications, Kingo headed Novo’s “corporate stakeholder engagement” program, which includes sustainability initiatives, ethics oversight and corporate image-making. Bagsværd, Denmark-based Novo Nordisk has nearly 40,000 employees and production facilities in seven countries, with affiliates or offices in 75 countries

United Nations secretary-general Ban Ki-moon appointed Kingo to the Global Compact post in late June to replace Georg Kell, who helped create the initiative in 2000.

Kingo is also deputy chair of the Danish Nature Foundation and member of the boards of Grieg Star Group A/S and C3 Collaborating for Health.

Pension funds across the globe, confronting an ever-expanding array of challenges, are increasingly embracing alternative investments, de-risking and other strategies to keep corporate balance sheets in the black. Gone are the days when plans of all stripes reaped easy returns from high-interest mutual funds and reliable stock market rallies.

The industry is grappling with tenaciously low interest rates, volatile bond and equity markets and, most recently, wild exchange rate fluctuations. In the US, regulatory pressure has amped up, along with premiums levied by the Pension Benefit Guaranty Corporation and challenges from corporate auditors over sums set aside for pension liabilities. Managers of defined-benefit (DB) pension plans must also reckon on longer lifespans for retirees, just recalculated by the Society of Actuaries, which inflated 2014 pension liabilities by an estimated $29 billion at 17 big US companies that adopted them, according to Russell Investments.

The 17 companies belong to the global asset manager’s so-called $20 billion club of 19 multinationals with DB liabilities exceeding their namesake figure (see table, opposite). Their combined pension deficit of $114 billion at the start of 2014—the lowest since 2007, according to Russell—surged to $183 billion as a result of the new longevity numbers and lower interest rates.

“It’s challenging to find returns. There’s no obvious way,” says Bob Collie, chief research strategist, Americas institutional, at Russell Investments in Seattle, Wash.

Increased longevity pressures plan sponsors to churn out additional returns for their employees. And sponsors in some European countries also contend with built-in cost-of-living increases that can accompany pension payouts. That said, managers of defined-benefit plans in Europe have been adjusting to revised mortality tables for some time after starting to freeze accruals to the plans about 10 years ago—nearly a decade after the shift to defined-contribution plans first began.

Jim McHale, a principal at PwC in New York, said defined-benefit plans are generally not part of the pension landscape in Asia, save in Japan, where there are many cash-balance or pension-equity-type plans.

The bane for Europe’s pension plans continues to be the steep decline in both interest rates and long-term bond yields. “Bank deposit rates in Switzerland and 10-year bond yields in Germany are negative, (which) has caused liabilities for typical plans to increase by 25% to 30% in calendar 2014 alone,” says Tim Reay, director, global pensions, at PwC in London. “Unless they operate a matching-asset strategy, this will have had a significant impact.”

In response, Russell Investment’s Collie says some defined-benefit plans are diversifying, while others accept lower returns and follow more conservative approaches. “There is no longer one approach. Pension plan managers are not just following the herd,” he says.

Some experts see corporate financial executives increasingly seeking to eliminate the risk of defined-benefit plans by transferring plan liabilities to insurance companies through mechanisms such as annuities.

“The confluence of events is leading to more and more plan sponsors moving to mitigate their risk,” says Wayne Daniel, senior vice president, US pensions, for MetLife. “The risk was always there, but it has been under-recognized. Now companies are fully understanding it and want to pass it on to an insurer, who is used to managing (it).”

Transferring risk to an insurance company saves chief financial officers a big headache. “They can focus on making widgets … not focus on managing their pension liability risks,” Daniel says.

David Petu, managing director, Financial Institutions, Fitch Ratings in New York, says the process of going off balance sheet is highly complicated and not taken lightly by corporate financial officers. “It takes a lot of planning. To close it out, you have to have all the employees on board. There are a lot of moving parts.”

Managers have also been seeking out alternative investments such as hedge funds, exchange-traded funds and real assets—in particular, real estate and financing infrastructure projects like roads, bridges and airports—that can produce revenue streams, says Barbara McKenzie, chief operating officer of Principal Global Investors in Des Moines, Iowa. She notes that commodities have become less popular as their prices have headed downward.

“We aren’t seeing much in the way of alternative strategies as stand-alone options in 401(k)s, but these are finding their way into target-date and target-risk funds,” says McKenzie, referring to a hybrid mutual fund that automatically resets the mix of assets in its portfolio over a selected time frame appropriate for a particular investor—usually retirement. Target-date funds came into vogue in the 1990s and are being offered more frequently now. The funds, while sometimes criticized for a one-size-fits-all approach, are easy ways for people to put their retirement investing activities on autopilot with the funds recalibrated as the plan participant ages. They also curb investors’ tendency to shift investments when stock markets plunge or bond yields decline.

PwC’s Reay cites the drop in long-term bond yields as the single factor with the greatest impact on pension plans everywhere. In response, investment managers are following liability-driven strategies, using hedging and derivatives to reduce volatility and capture additional returns from investing in equities as they reduce exposure to swings in interest rates.

He also notes that vehicles called longevity swaps, to offset exposure to longer lifespans, are being used in the UK and eyed with interest in continental Europe.

As global economies head into summer, whether in Europe, Asia or the United States—analysts say currency risks are center stage.

Rates “are moving all over the place,” says McKenzie, which makes it tremendously difficult for investment professionals to pinpoint just when to enter emerging markets and when to sell. “There is a lot of angst,” he says.

Global Finance: The role of trade credit insurers has moved beyond simply underwriting credit risk and paying out claims. What tools and techniques does Euler Hermes use to help a company determine whether a potential customer is a good risk?

Jochen Dümler: We see ourselves as an adviser to help companies, whether they are moving into a new region or sector or selling to a new customer in the same market. We look at the political risk of a country or a region. We look at the risk of an industry at the specific point in time, and the risk of a particular company. We analyze all the financial data—such as the buyer’s finances, profits, liquidity, payment behavior and location—using people on the ground in the market being assessed, and put it into a mixer and assign a grade to that potential customer.

GF: Which markets are the most difficult for a credit risk insurer to assess?

Dümler: Markets in which transparency is an issue…where the quality of the information can be debatable. For example, Russia or China. In some countries, there are real balance sheets and fake balance sheets. We have to know the difference. We use credit analysts in the market and invest in staff with the expertise. We use every piece of information we can get. But we never join forces with shady operations.

GF: US companies are not significant purchasers of credit insurance, compared with European companies. Why is that?

Dümler: That is the golden question. If I knew the answer to that, I would push the button and business would explode. The US market is, at maximum, 10% of what we find in Europe. European companies know about trade credit insurance. In the US, many companies don’t know what it is. We think it’s [also] a cultural issue. US entrepreneurs are less willing to insure: They are bigger risk-takers.

GF: Are certain industries known for being big purchasers of the product?

Dümler: There is a good foothold in retail, food, the chemical industry. Energy has vast potential. We’re opening an office in Houston.

GF: What geographic markets are the most heavily penetrated?

Dümler: Spain, France, Italy, the United Kingdom and Germany. Poland has developed very quickly since 1995. Central Europe is strong. In general, Asia-Pacific is underpenetrated, [except for] Australia and Hong Kong. China, Russia and Brazil have the most potential. The Gulf region, including Saudi Arabia, is dynamic and growing. In India the market has faced heavy restrictions. We have well-established operations in Russia. We brought people into Brazil before there was the need, because we saw the opportunity for growth. We’re not in Iran, Afghanistan or Somalia.

GF: Is there a certain size of company that can benefit particularly from the services of a credit risk insurer?

Dümler: Any size company can benefit, from a potato grower in Iowa to a multinational. [When] we meet with chief financial officers of large companies and talk with them, they may have five ingredients that help them assess the risk of doing business with a potential customer. We add a sixth ingredient to the mix. We can also help large companies protect against catastrophic losses. We try to steer clients to areas where the reliable information means they will be successful. For example, several years ago we steered clear of efforts in the Spanish construction industry. It was not worth it, no matter how the risk was priced.

GF: How has the decline in oil prices affected the business?

Dümler: Any factor that makes goods cheaper is a good thing.

GF: What is the most sensitive part of your business?

Dümler: We head into sensitive territory when a company is in trouble and their numbers and results are deteriorating. We want to protect our clients, and we will tell them when the situation is too risky. On the other hand, we don’t want to create an insolvency. A company in trouble may be more reluctant to share data. It’s a bad sign if they start selling the family silver…their real estate. But we work with a company in trouble. We want to avoid a bankruptcy.