Three Questions: Karen Clark on Climate-Conditioned Models

KCC’s CEO talks about the need for climate conditioned catastrophe models and the role they will play in the market.

Three Questions: Karen Clark on Climate-Conditioned Models

Last week catastrophe modeling firm Karen Clark & Co. (KCC) announced that it was releasing stochastic climate-conditioned catalogs for weather-related perils impacted by climate change.

The catalogs, associated with hurricane, flood, and wildfire models, is based on research and analyses on how warming sea and air temperatures are impacting the frequency and severity of events, according to a KCC statement.

RMN asked CEO Karen Clark about the new catalogs and what need they were filling in the market.

Risk Market News: What type of clients are seeking climate conditioned models, either by sector or region?

Karen Clark: All of our insurer and reinsurer clients are seeking these models and the results they produce for different climate projections. Questions are being asked by internal as well as external stakeholders on how (re)insurers are addressing the future impacts of climate change. ESG and the growing reporting requirements can be addressed with these models.

Specifically, the climate conditioned models inform (re)insurers on how vulnerable their portfolios of property business are to increased hurricane wind speeds, more frequent and severe floods, and larger wildfires. That is, how is the damage and loss potential changing by book of business, region, and peril. Not just (re)insurers but any company with property assets can benefit from these models, particularly large property managers and developers, hotel chains, and REITs.

RMN:How do you educate clients to use, I would assume, a more complicated model with a new set of inputs?

Clark: The climate conditioned models are in the same format as the standard models so there is no additional education required on how to use or run the models. Where more education is required is around the science underlying the model assumptions.

Our clients want to know in detail how KCC scientists translate the very advanced climate science into the model components and finally the loss estimates. Our clients value the transparency around this process the KCC scientific team provides so they can have confidence in the numbers and can base forward-looking risk decisions on these numbers.

RMN: What are the biggest gaps they see in climate conditioned models?

Clark: Currently, the scientific consensus is there’s only high confidence around projections of hurricanes, wildfires, and floods. For other weather-related perils, such as severe convective storms and winter storms, there’s not enough confidence around the science to make future projections of frequency and severity.

Also, despite the relatively high confidence around hurricanes, wildfires, and floods, there’s considerable uncertainty around projections of climate change impacts out to 2050. KCC scientists will be updating the climate conditioned models as the science and projections evolve.

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