As insurers come under pressure to prove they aren’t insuring carbon heavy industries like oil, gas, mining etc. the importance of carrying out climate agenda checks at every step of the way is becoming paramount. Many more insurers and major brokers are now placing Climate or Sustainability CEOs onto their Boards too. This ideology will have a huge impact on claims in the future as politicians and activists seek to compel insurers to rebuild infrastructure to meet climate agenda targets. Settling claims after natural disasters like floods or hurricanes now requires a more political approach – it isn’t just about replacing the roads, businesses, or houses as they were.
RMS, the world’s leading catastrophe risk solutions company, today announced the forthcoming launch of a new suite of Climate Change Models to help customers assess the near and long term impacts of climate change on physical assets and their businesses, in order to make the best possible risk and financial decisions.
According to RMS CEO, Karen White, “Today there are no robust or consistent frameworks that can quantify the physical risks posed by catastrophes in a changing climate at the depth required. The innovative suite of RMS Climate Change Models changes that, giving the market a powerful new set of tools. With increasing Board-level attention, stakeholder scrutiny, and regulatory pressure, businesses need to operationalize climate change analytics to make better decisions and enable better transparency.
It is clear that the financial impacts of climate change are not solely a “future problem”. The increasing incidence of wildfires, floods and hurricanes mean that climate change insights need to be incorporated into financial decisions that are being made today, in parallel with long term strategic planning and meeting increasing regulatory, environmental, social and governance (ESG) and TCFD reporting requirements, and investor and customer demands. This necessitates a climate change framework and models fully consistent with today’s catastrophe risk analytics and one which addresses the challenges posed by physical climate change risk and its broad impact across all relevant time scales – from today through to the end of the century.”
Most RMS models, including all major peril models, already incorporate the impact of climate change up until now – but more is required to meet the evolving and significant market needs. The new RMS Climate Change Models take our existing capabilities further with forward-looking predictive insights and analysis.
The new Climate Change Models empower RMS’s economic modeling framework with the best climate science consensus, including from the Intergovernmental Panel on Climate Change (IPCC).
The new models will be generally available in June for major peril models North Atlantic Hurricane, Europe Inland Flood and Europe Windstorm. Further models and geographies will follow this initial model suite launch. The RMS climate change solutions also include climate change specialist advisory and consulting expertise and regulatory, ESG and TCFD support.
The Climate Change Models address the perils most impacted by climate change and feature:
- Probabilistic modeling to capture events across different climate change scenarios
- The ability to adjust time horizons and Representative Concentration Pathways (RCPs)
- A proprietary industry and economic exposure database to deliver more accurate and impactful climate change models
- Embeddable software which integrates into existing workflows to facilitate seamless and easy operationalization
- Consulting and additional expertise supporting regulatory submissions and activities, and providing insights from these new models today
Commenting on the RMS climate change solutions, Eric Letourneau, SVP, Group Head of CAT Accumulation Management, QBE, said: “The insights on climate risk provided by RMS have enabled us to better understand climate-related risks and opportunities for our business, to report those insights to financial stakeholders, and to develop and test strategy for our business. We can embed these analytics in our business processes, confident that we have consistency with how we measure underwriting risk and capital requirements now and in the future.”
The new RMS Climate Change Models, data, and analytics empower organizations to:
- Understand the impacts climate change may have on capital and assets today and in the future
- Price and manage risks to better reflect changing conditions
- Confidently communicate risks posed by climate change to all stakeholders
- Comply with regulatory submissions in an efficient and sustainable way
RMS has been modeling natural catastrophe risk for the insurance industry for more than 30 years and has been leading research into the impact of climate change on catastrophic losses since RMS’s involvement in the 2007 4th IPCC Assessment Report.
You can learn more about RMS Climate Change solutions here: