Climate Risk Stress Testing for Physical Risk from Natural Hazards - Part I

Methodologies on Climate Scenario Analysis for insurers have been developing rapidly over last years. Ongoing attention by all stakeholders, pilot exercises all over the world and a substantial increase in awareness towards climate-related risks have incited insurers to develop and refine their stress testing capabilities on climate-related risks.

In this session, we will focus on the practical aspects of physical climate risk modelling and scenario analysis for insurers, providing a step-by-step walkthrough on key elements of such an analysis based on a case study. Specifically, we will discuss and illustrate hands-on approaches on modelling damages on location-based portfolios, such as real estate asset or property insurance portfolios. We will present results from case studies on damages from flood, hail, wildfire, and tropical cyclones for selected countries, leveraging peer-reviewed public data. Furthermore, we will discuss the challenges on application for insurers, and also highlight key assumptions, limitations and uncertainties accompanying this assessment.

This session will cover various practical aspects around physical climate risk modelling and scenarios analysis, including:

• Understanding how climate change affects different natural catastrophe risks for insurers.
• Exploring the modelling of physical hazards under climate change for location-based portfolios and discuss peer-reviewed data that can be leveraged for this assessment.
• Step-by-step walkthrough of key elements for preparing and performing a climate risk stress test for a property portfolio and illustration based on a case study.
• Discuss results from a case study focusing on flood, wildfire, and tropical cyclones for selected countries, and highlight common challenges in application.
• Highlight key assumptions, limitations, and uncertainties surrounding this assessment.

Find Part 2 of the session here: