InsuranceERM Annual Awards 2021 - UK & Europe

Climate risk management solution of the year: Conning

Insurers' focus on climate risk has certainly accelerated over the last 12-18 months, largely driven by supervisory statements requiring the sector to start treating climate risk as a true economic risk on the balance sheet.

Matt LightwoodConning has responded to this increased regulatory interest by launching a stochastic climate risk reporting service. The service concentrates on the asset risk side of the balance sheet, which Conning says is an underdeveloped area in climate risk modelling.

The tool produces a climate risk report, powered by Conning's GEMS economic scenario generator software, detailing the future risks to portfolio market values under a range of climate scenarios and stochastic economic projections.

Users of the service also have access to underlying scenario sets for their asset and liability modelling systems.

Conning says the tool's stochastic modelling approach enables a much wider range of analytics to be produced compared with standard stress testing. This allows users to better capture the subtle but continuous impacts of climate change that will emerge over the coming decades.

Matthew Lightwood, Conning's global product manager, says the actuarial and the risk modelling function has "to stay on point" as far as climate risk goes.

"Inherently being a risk business, we need to use our skills to develop quantitative models to assess the risk," says Lightwood.

"But we also have to use those models as a tool to drive qualitative analysis. In addition, we really need to use our experience to understand the limitations of what we are doing, as well as communicating our thinking on climate risk to board level."

Lightwood added that Conning intends to launch the product as a full Software as a Service offering in early March 2021

InsuranceERM's judging panel commended how Conning's climate risk reporting service gives users the flexibility to choose climate scenarios that are linked to scientific projections of global warming.

They also praised the tool's holistic nature and the way it allows a climate systems impact analysis on a portfolio.