Climate change is increasing the frequency and severity of natural catastrophe perils and associated physical risks. At the same time, the shift to a lower-carbon economy is spawning multiple transition risks. Failure to manage both the physical and transition exposures is creating the potential for liability risks, Guy Carpenter said.
The company has established a range of services designed to address multiple facets of both physical and liability risk, while utilising the capabilities of other Marsh McLennan businesses to tackle transition risks.
Key services include:
- Physical risk modelling: Natural hazard assessment and risk modelling, exposure data enhancement, adjustment of catastrophe models
- Risk governance and regulation: Capital modelling and solvency capital requirement calculations, regulatory compliance processes
- Risk transfer: Traditional risk transfer, parametric instruments and catastrophe bonds
- New institutional arrangements: Advice on public risk transfer solutions and public-private partnerships
- Insurance products: Risk underwriting for new technologies and infrastructure
“The myriad challenges resulting from climate change have initiated action, with early adopters seeking to demonstrate best-in-class responses to these issues,” said Peter Hearn, CEO of Guy Carpenter. “To reach that level, clients must gain clarity around critical areas such as their physical exposures to climate risk, how they manage transition risk, how they address potential liability risk, and how they underwrite towards greener outcomes.
“By offering this wide spectrum of climate-focused services and collaborating with the wider Marsh McLennan businesses, we can help our clients achieve that clarity.”
By using catastrophe modelling tools for different time horizons and warming assumptions, geographic accumulations of risk and underwriting, Guy Carpenter can help companies quantify the impacts of potential climate scenarios on the overall volatility and tail risk of their insured portfolio, the company said. Clients can use Guy Carpenter’s tools to prioritise their climate-related activities while also benchmarking the success of their approach against industry peers.
Working together with Marsh, Oliver Wyman, and Mercer, Guy Carpenter can also provide services in other climate-related areas, including transition risk modelling, climate investment portfolio modelling, asset-level resilience surveys and scoring, and commercial due diligence.
“Managing climate risk is becoming an increasingly prominent component of an organisation’s overall environmental, social and governance approach, with the majority of our clients expressing a strong desire to develop robust strategies on this front,” said Dean Klisura, president of Guy Carpenter. “As the direct impacts of a shifting climate reverberate through our industry, Guy Carpenter is working to provide our clients with the foundations necessary to build resilience, ensuring that they are in turn able to deliver for their clients during this transformative period for our planet.”