Moody's Analytics - Climate Pathway Scenario Service
Type of System
Climate risk management
Type of platform
What are the typical implementation costs?
Moody’s Analytics does not disclose pricing.
How long does your software take to implement on site?
This depends on the client’s requirements, but often clients can be up and running very quickly. For a simple configuration, installation and setup may only require a few hours.
Please name companies that use the system/solution
Most recent significant update:
Moody’s Analytics Climate Pathway Scenarios service is helping power insurers’ asset and liability projections to facilitate customers’ efforts to respond to ORSA and Task Force on Climate-related Financial Disclosures (TCFD) requirements to quantify the financial impact from physical and transitional risk.
The service provides forward looking climate-aligned economic scenarios that can be built from either the ‘Network for Greening the Financial System’ (NGFS) framework, Moody’s Analytics climate-aligned Economic assumptions or the client’s own assumptions.
The service can provide both deterministic or stochastic scenarios that captures the implied market and credit risk associated with each temperature path and covers a wide range of financial outputs including full set of nominal and real yield curves, credit spread curve, that incorporates default risk, inflation rates, exchange rates and assets return for a wide range of asset classes (both at a geographical and sector basis).
In addition, insurers can explore the scientific and socio-economic uncertainty inherent with climate risk modeling with options to vary the choice of integrated assessment model, physical damage assumptions and temperature percentiles used.
We are working with insurers to integrate climate risk into their ORSA process and support TCFD compliance.
Planned future enhancements:
How does your solution integrate with third-party systems or in-house systems?
Our scenario generation solutions and Climate Pathway Scenario service integrate with Moody’s Analytics AXIS™ actuarial modeling system and all major ALM systems. We have grid-compatible architecture that works with grid products from Microsoft and Digipede, which clients license separately from these companies.
What is the key attribute of your product(s) that differentiates it from your competitors?
Our product provides the scenario content insurers need to measure the financial impact on their business from climate risk by translating the climate temperature paths into financial returns. We look beyond the impact of GDP changes, specifically quantifying physical damages and impairment costs in each scenario, and account for the effect of changes in costs of capital on financial market valuations.
Our scenarios also capture current market prices, and the implications of these for future returns rather than taking a long-term equilibrium basis for initial pricing of assets and risks.
Using a structured approach to quantifying the costs in each scenario, allows us to consistently adjust the projected paths for different financial variables across the range of published NGFS scenarios, for multiple scenario assumptions and uncertainties, and for a mix of different investments and portfolio exposures. Thus, we can explore the array of possible pathways in a multi-scenario framework in ways that recognize the risk and uncertainties inherent in long-term economic or climate modeling.
What trends are you seeing in terms of customer demand?
External scrutiny, corporate values, and financial impact are driving insurers to address climate challenges across a range of business functions. We are experiencing demand for risk identification and measurement relating to climate risk in economic and regulatory capital. Assessment through ORSA and monitoring for climate-related risk to business solvency and capital. To comply with the TCFD mandate and include climate risk impact in regulatory and financial reporting. A further dimension is board understanding and oversight of climate related risk. To give the board with detailed information of both the actual, and future business impact for strategic planning.