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A strategic response to climate change

Insurers increasingly find themselves being pushed to the front of the queue for meaningful action on climate risk and resilience. As the articles in this special Insurer Solutions climate risk series demonstrate, a strategic response is required that will need to consider the breadth of an insurance business across people, risk and capital.

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Ahead of the delayed COP26 meeting in Glasgow in 2021, organisations including the Bank of England, the Prudential Regulation Authority, EIOPA (European Insurance and Occupational Pensions Authority), the International Association of Insurance Supervisors, and the New York Department of Financial Services have all dialled up the regulatory heat in 2020. Moreover, it seems increasingly inconceivable that widespread mandatory reporting of climate risks is not far around the corner in many markets – particularly with the growing impetus behind the TCFD (Taskforce for Climate-related Financial Disclosures) framework, as illustrated by the UK joint regulator and government TCFD Taskforce’s interim report and accompanying roadmap signalling the intention to make TCFD-aligned disclosures mandatory across the economy by 2025, with a significant portion of mandatory requirements in place by 20231.

Adapting from experience

Insurers have, for as long as weather and natural catastrophe models have been in existence, always been in the forefront of the commercial assessment of climate risks. Mostly, this has been for underwriting purposes.

The challenge today is wider than that – further building on what some companies have already started with stronger ESG (environmental, social, governance) foundations. It puts climate centre stage in business strategy as the global challenge of achieving a just and orderly transition to a low carbon, climate resilient economy increasingly dictates that climate considerations are pivotal to financial decision-making. The bottom line is that climate risk is financially material and becoming more so.

As the articles in this special Insurer Solutions Climate Risk Series demonstrate, a strategic response is required that will need to consider the breadth of an insurance business across people, risk and capital.


How Willis Towers Watson can help

As part of taking responsibility for, and an active part, in the transition to a low carbon economy, an essential step for most organizations is to quantify how they will be affected by, and can affect, the climate change trajectory through mitigation measures and by building climate adequate and resilient solutions.

Key areas where we are helping insurers develop this understanding include:

  • Risk assessment and quantification using a range of proven, proprietary analytics tools, that are constantly being refreshed to reflect the latest science and predictive climate change scenario datasets
  • Board-level training on the complex nature and interactions of climate-related physical, transition and liability risks
  • Reporting and governance – including analysis of and preparations for the TCFD requirements.

We deliver this through Climate Quantified™, which integrates our deep weather and climate analytical experience from the (re)insurance, broking and investment markets, our knowledge of and role in contributing to climate and resilience policy and regulation, our extensive academic, scientific research, and institutional investor relationships, and our multi-discipline expertise and capabilities.

The extra value we bring comes from recognition of the interplay of data and sophisticated analytics with law, regulation and policy, and how these factors impact the allocation of capital. Through Climate Quantified™, Willis Towers Watson is uniquely positioned to support companies address the impacts of climate change across people, risk and capital.

Accordingly, the activities of the Willis Research Network, our Climate and Resilience Hub and the Thinking Ahead Institute in translating the latest research and thinking on climate risks and resilience into insights for our clients are key and differentiated components of our offering, as are our initiation of and involvement in programmes such as the Insurance Development Forum and the COP26 flagship Coalition for Climate Resilient Investment initiative.

We are working with insurers across the industry to respond and help them thrive and achieve profitable growth. Insurer Solutions brings together risk, capital, people and operational solutions combining advisory, technology and analytical skills that are distinctive in the industry, and which help guide insurers towards profitable growth and a sustainable future.

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