The reinsurance market exists to help risk aggregators — often insurance entities — manage the volatility embedded in their obligations to policyholders when adverse events, such as floods, wildfires and hurricanes, impact many of their policies at the same time. As climate change and the associated increase in natural catastrophe events alters the contemporary risk landscape, there is now an opportunity for companies to partner with the (re)insurance market and put its expertise to work.
While it is often discussed in boardrooms as a major risk, climate change is also a business opportunity, according to Scott McDonald, CEO of Oliver Wyman Group and Rob Bailey, Director of Climate Resilience at Marsh & McLennan Advantage. Oliver Wyman is an affiliate of Guy Carpenter.
The low-carbon transition creates opportunities for efficiency, innovation and growth that extend beyond high-carbon industries like energy and transport to all sectors. Companies can save energy and materials costs, serve new customer needs, enhance their reputations and better attract and retain talent — all as a consequence of working to reduce their emissions and those of their customers and suppliers.
Through their governance role, boards can help to ensure that climate opportunities are captured by reviewing corporate strategy and focusing on long-term value. This is truer than ever before as companies navigate the fallout from COVID-19 and plan for recovery: Executive teams are occupied with the “here and now” of operational and financial management, and boards will need to keep the pressure on management teams to engage with the strategic questions of what comes next.
Guy Carpenter is well-placed to advise clients on responding to climate change risk. We have multiple experts in atmospheric and climate science across the globe that have been actively researching and consolidating the scientific literature. Our solutions can help clients make informed decisions about pricing, capital and risk management strategies.