Risk Management

Climate change challenging risk managers

Claire Wilkinson

April 12, 2022 Reprints

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SAN FRANCISCO — Climate change is at a critical juncture and risk managers have an important role to play in tackling this issue, an expert said during an innovation hub session at the Risk and Insurance Management Society Inc.’s Riskworld conference Monday.

“There’s too many times when risk managers are not in the room on this issue,” said John Merkowsky, head of risk & analytics, head of large account strategy, risk & broking, at Willis Towers Watson PLC.

Climate change is creating physical exposures and challenging the insurance industry’s ability to respond to the rapid pace of climate exposures, such as the increased severity of extreme weather events, Mr. Merkowsky said.

Managing the transition to a low-carbon economy can also leave businesses facing a range of exposures, such as policy, legal, reputation, technological and market risks, he said.

“We’d better be ready to think about these risks in a different way than we have in the past,” Mr. Merkowsky said.

Climate change is also creating liability exposures and reputation risk exposures for companies due to increased litigation, while a shifting regulatory environment is amplifying climate-related exposures, he said.

There is a “rapid acceleration coming together,” on climate, he said.

Understanding climate as an amplifier of all risks is important, Mr. Merkowsky said.

While insurance, like environmental liability coverage, exists for some climate-related risks, climate change is also going to introduce new risks that risk professionals haven’t thought about already, he said.

There is an opportunity for risk professionals to be more involved in the discussion on climate change, he said. “Risk professionals should be leading the discussion on physical risks, transition risks and liability risks,” Mr. Merkowsky said.