BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
Businesses are increasingly seeking new ways to mitigate and manage climate risks, and demand for alternative tools and strategies to help them reduce property losses and adapt to a changing climate is accelerating.
The need for support comes as corporations face rising pressure from regulators, investors, rating agencies, employees and customers to disclose their climate change risks and how they intend to manage them, industry experts say.
Society is starting to grapple with the effects of climate change on the frequency and severity of natural catastrophes, “whether it’s increasing wildfires in California, shipping patterns in severe storms or changing behavior of hurricane events,” said Liz Henderson, co-head of Americas catastrophe risk analytics for Aon PLC in Chicago.
The heightened awareness is driving increased demand for climate risk analytics and technologies from insurers, she said.
The insurance industry is seen as a critical component of the response to climate risk, said David Sherwood, a Stamford, Connecticut-based managing director at Deloitte & Touche LLP.
But necessity is the mother of invention, and “it’s not until we have events like COVID or climate that they become catalysts for the need to reinvent or to think differently,” he said.
Early warning indicators, more rapid claims support after an event, and drones are some of the innovative areas in which insurers are working on climate risk mitigation.
“As we get more data on the nature of these risks, going forward insurers might need to think about how they can incentivize the underlying policy” to encourage policyholders to take proactive steps around mitigating climate-related risks, Mr. Sherwood said.
Large global companies in the retail, real estate and manufacturing sectors are showing the greatest interest in climate risk mitigation services, said Adam Hurley, head of property risk engineering for Zurich North America. “Large global retailers have distribution channels, material suppliers, all things that can drive some of these risks. They also tend to have outlets everywhere, so the risk is spread,” he said.
Zurich models future climate change scenarios to give its clients a “forward-looking lens” to manage risks, Mr. Hurley said. It is also helping policyholders manage risks as they transition to cleaner energy, whether by adding solar panels or another technology. “We want to make sure they don’t add risk while they’re trying to be more sustainable as a company,” he said.
More organizations are installing solar panels on the roof or walls of a building and adding insulation as they look to become energy efficient, said Katherine Klosowski, vice president and manager, natural hazards and structures engineering, for FM Global in Johnston, Rhode Island.
Such technologies can add risk. Solar panels can increase a manufacturer’s exposure to fire, hail and windstorm, while extra insulation can increase fire risk. It takes some forethought, engineering and knowledge to mitigate against these risks, Ms. Klosowski said.
“Clients are making many of these changes to be a sustainable organization, which means their organization is not going to have a big impact on the environment. We want to work with them to make sure their organization is also resilient, which means the environment isn’t going to have a big impact on their organization,” Ms. Klosowski said.
Many companies, including insurers, are partnering with climate risk analytics ventures to boost their climate data and modeling capabilities. For example, ratings agency S&P Global in January acquired The Climate Service Inc., a Durham, North Carolina-based startup.
The Climate Service models and analyzes both physical and transition risks globally, said CEO James McMahon. The analysis aims to help companies such as auto manufacturers make long-term strategic planning and capital allocation decisions by better understanding how the climate will change and affect supply and demand and production, he said.
It is also intended to provide insight into how risks are changing so a manufacturer can work with its risk transfer provider to ensure it is adequately hedging and transferring risks, Mr. McMahon said.
“With the global view we can look at risk interdependencies within the supply chain,” said Steven Bullock, global head of ESG Innovation and Solutions, S&P Global Sustainable1, in London.
For the auto sector there is a huge opportunity in the transition to a low-carbon economy, understanding the role electric vehicles can play and the net benefit that they might produce in different locations, Mr. Bullock said.
There is also growing interest from insurers, as well as banks and other industries, in modeling the effect that climate change may have on asset allocations in their investment portfolios, said Matthew Lightwood, a director, risk solutions, at Conning Inc. in Cologne, Germany.
With Conning’s cloud-based climate risk analyzer, companies can posit a particular climate scenario, such as a temperature change happening over the next 20 years and model the future impact on their portfolio’s market value, Mr. Lightwood said.
Captive insurers have a growing role to play in financing climate-related risks and environmental, social and governance initiatives, experts say.