28 March 2022 – ClimateWise members unpack the implications of scenario analysis for underwriting with UK flood example.
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About
The ClimateWise whitepaper considers the options, implications and communication of scenario analysis for underwriting non-life insurance. It raises awareness of different natural catastrophe modelling approaches and highlights the valuable insights that can be generated across the insurance business. This further shows the unique opportunity for business and society to engage with such analysis and better understand the benefit of managing physical risks in a changing climate. As an example, we present the outputs of UK flooding from two different multi-flood-type quantification approaches from Ambiental and JBA Risk Management.
Given the data available, modelling expertise and regulatory momentum for scenario analysis in the UK, this white paper focuses on flooding to demonstrate impacts of climate change on one peril. The recommendations are then drawn more widely to reflect the ClimateWise membership, the insurance industry and its global scope and remit. The paper aims to explain how we use climate-conditioned catastrophe models to undertake scenario analysis. With this, we could understand how climate risk propagates through different areas of the insurance underwriting process and the relevant considerations and implications for insurance firms, the insurance industry and society. Following this research we make recommendations on how to progress scenario analysis in underwriting for insurance firms, the insurance industry and wider society.
ClimateWise members are committed to understanding and managing the physical impacts of climate change within their own business as well as promoting wider financial sector, policy and societal resilience to climate change.
Citing this report
University of Cambridge Institute for Sustainability Leadership (CISL). (2022). The Coming Deluge: Scenario analysis for underwriting in a changing climate. Cambridge, UK: University of Cambridge Institute for Sustainability Leadership.
Find out more about ClimateWise here.
