Climate risk management solutions

Climate is a top risk of concern for corporate leaders. But most are unclear on how to identify, quantify and solve for it.

WTW has the tools and expertise to help guide risk management leaders through:

• Identification and quantification of climate risk
• Evaluation of portfolio to define coverage gaps
• Enumeration of protection options
• Evaluation and optimization of potential solutions
• Implementation of the selected insurance and non-insurance climate risk solutions
• Continual evaluation of changes in the regulatory environment and carrier appetite, and advancements in technology

Evaluating risks

Physical risk

• Our state of the art analytics tools evaluate an organization's risk of loss at owned, leased or operated facilities due to river flood, sea level rise, tropical cyclone/storm, chronic heat, drought stress and wildfire over various warming scenarios and time periods.

Transition risk

• WTW can advise on climate change driven macroeconomic shifts that will impact an organization's business, pointing out both operational challenges as well as opportunities on the horizon.
• Transition risk is the loss or gain in the value of an asset driven by the transition to a low carbon economy, technology development, regulatory change and changes in consumer and investor demands. Assets are repriced, incorporating transition risks, to forecasted future cash flows.
• Evaluation includes modeling of financial criteria as we move to a net zero economy, including: pricing for product, projected costs of raw materials, value of current and future operating assets — all based on an agreed (and flexible) warming scenario. Modeled valuations are then consolidated to show cash flow over time.

Liability risk

• Climate liability suits arise from 3 main areas: emissions, regulatory and governance lapses, and failure to adapt. These cases can result in directors' and officers' (D&O) and liability claims. There are over 1500 climate liability cases in U.S. courts currently.^[1] WTW evaluates climate liability exposure based on an organization's operations, jurisdiction, public statements, and industry resulting in a clear understanding of potential for climate liability suits.

Physical, transition and liability are the major climate risk types.

Insurance coverage gap analysis

Understanding how insurance coverage will respond to climate risk, both at the present and as coverage appetites change, is critical for the financial wellbeing of companies and organizations. Our gap analysis methodology, underpinned by WTW's analytics, technical broking and Insurance Consulting and Technology (ICT) arm, is at the center of how we help clients identify climate risk and its potential impacts.

WTW overlays an organization's climate risk profile onto their insurance coverage portfolio — revealing gaps in coverage. These gaps can include: sites exposed to extreme weather for which the organization is underinsured; risks where frequency is projected to increase, making deductible costs too high; operations for which carriers exclude coverage; as well as risks where coverage may be available this year, but is expected to be restricted in the near future.

Overlaying an organization's climate risk profile onto their insurance coverage portfolio reveals gaps in coverage.

Risk solutions

What options are available to cover gaps? There are a variety of solutions that can be used to mitigate climate risk. We help clients to understand the breadth of each solution so that they can decide the most appropriate course of action for their business.

There are a variety of solutions that can be used to mitigate climate risk.

Optimization

Determining the best path forward with climate risk solutions can be daunting. With WTW, our risk and analytics capabilities enable us to provide our clients with a holistic portfolio picture to best decide the optimal solution for them. We ensure the optimal solution is selected from a return on investment perspective. The evaluation of return can be done considering an organization's time horizon. For short term investors, this may be 5 years or less; for long term investors, family-owned businesses and public entities, this may be more than 25 years.

Connected Risk Intelligence enables evaluation of client's climate risk management solutions against changing dynamics.

Implementation

Once a solution set has been decided upon, our technical broking and risk control teams stand ready to guide your business through the implementation process. WTW is well versed in the placement of tailored traditional and ART coverage solutions, and supporting clients through the implementation of the mitigation measures needed to manage complex and evolving risks like climate change.

WTW's Climate Risk Solutions allow risk management executives to play a leading role in understanding and building protections for their organization's climate risks today and long into the future.

Horizon scanning

Climate risk is dynamic. It has numerous variables that can alter an organization’s exposure for better or worse, including: newly emerging local, state and/or federal regulations; court decisions; changing carrier appetites; and new risk evaluation and mitigation technologies. WTW collaborates with our carrier partners, as well as with associates in academia and government, to not only scan the horizon for, but also guide the direction of, these new developments. Keeping ahead of change allows us to be prepared rather than reactive — a better position to be in to serve our customers. As new risks and solutions emerge, we engage with and advise our clients, keeping them apprised of developments year after year — ensuring solutions are fit for purpose for the long term.

Footnote

1. WTW Research Network in collaboration with Sabin Center for Climate Law at Columbia University Return to article undo

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).