Climate Risk Data Analytics within Insurance and Law 🌎

The severity of climate-related weather events and natural disasters has increased. From large regions submerged underwater, to intense wildfires and hurricanes, billions worth of damage has occurred worldwide. With 3.6 billion people already living in areas highly prone to climate change, it is no surprise that without resilience strategies, climate change weather risks are predicted to cost the global economy $23 trillion by 2050. It is vital for companies to understand the implications of climate risks on portfolio investment and asset levels to meet risk reporting and financial disclosure requirements.

Yet how can this progress if climate data tools are sparse, fragmented, and inconsistent? This is where the Climate X project comes into play. Founded by Lukky Ahmed and Kamil Kluza, the climate risk analytics provider assists organisations in mitigating physical climate risks through forecasting financial losses. These are able to be quantified through specific risk assessment models- which include combining physics, AI, 44 million miles of infrastructure and more than 500 trillion data points.

The Significance to Insurance and Law

With increasing client demand for climate risk management expertise, data tools like those within the Climate X project enable both insurance and commercial law firms to meet this whilst improving their business strategy. For insurance firms, the increased severity and frequency of climate-related events have exceeded projected payouts on claims, affecting profits and the price of premiums. This in turn leads to reductions in natural catastrophe exposures, whilst the number of insurers facing claims from climate-related litigation from and against clients increases.

Thus, commercial law firms may have to provide more informed advisory and drafting services on insurance policies and clauses (which are legal contracts) to ensure adequate coverage for climate risks. In the short term, demand for handling disputes from insurance-related climate change risk claims could rise. Continued support regarding regulations, corporate governance and climate risk assessments into investment decisions will also be needed. As a result, law firms must develop and enhance the services they provide in this area- including practices within insurance and climate change.

Overall, better access to climate risk data on physical asset valuations (through providers like the Climate X project) not only enhances the ability of law and insurance firms to meet regulatory requirements but also fosters resilience internally. Clients will also have a better understanding of their climate risk-coverage needs and own asset valuations, improving long-term investment planning and business operations.