Asian corporates gain climate risk tool

Swiss Re Corporate Solutions has launched a solution to help companies assess the impact of physical climate risk on their global portfolios. Underpinning these climate risk solutions is the insurer’s Climate Risk Score Framework.

The framework combines forward-looking climate model data for precipitation and sea-level rise with global flood and storm surge zones to create a high-resolution assessment of physical climate risk.

The climate risk solutions span three tiers, from a portfolio overview in the form of a climate risk score report at the entry level, to the provision of risk mitigation and risk transfer options at the highest level of the service offering.

Among the physical climate risk exposures that companies would be able to better assess and understand are river and flash floods (wet), wildfire and droughts (dry), and storm surges and coastal flooding (sea level rise).

Asia in the firing line

Jonathan Rake, CEO Asia Pacific, Swiss Re Corporate Solutions said: “Climate change is resulting in greater frequency and intensity of extreme weather events and natural catastrophes. This has a costly impact on businesses around the world but perhaps more so in Asia where coastal cities are prevalent.

“Coupled with the economic rise of Asia and the expanding footprint of Asian companies, the imperative to conduct a physical climate risk assessment and understand vulnerabilities to physical climate risks across a company’s operating locations is only increasing. This assessment would help companies safeguard their long-term interests and answer to customers, investors, regulators and other stakeholders.”

Identified climate ‘hotspots’ can be further delved into to produce explicit economic loss costs associated with climate change impacts. Many of these climate ‘hotspots’ are located in the Asia Pacific region, which continues to be disproportionately affected by climate change and secondary perils.

As reported in the latest Sigma, the region was hit by 81 large catastrophic events in 2020, suffering over 26% of the global economic losses last year. Insured losses from natural catastrophes were $10 billion, representing a $53 billion protection gap to the total $63 billion in economic losses incurred.

A physical climate risk assessment can help companies identify blind spots and bridge the insurance gap. It is also critical in broader risk management and in safeguarding long-term business interests, including being able to communicate climate-related financial disclosures to customers, investors, regulators and other stakeholders.

“Companies today are recognising the need to assess their exposure to climate risk for strategic, regulatory, sustainability, and brand reputation reasons… Climate Risk Solutions enables corporates to quantify the impact of physical climate risk on their portfolios,” added Rake. “A natural starting point for broader climate engagement, climate risk assessment forms an integral part of broader risk and business management.”