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One of the greatest challenges for insuring against climate risk is the unknown severity of that risk. Insurers are grappling with the difficult task of tailoring historic risk models to insure against climate events that are increasing in frequency and severity and are, therefore, not based on historic events. However, Jupiter, a company that provides analytics and data services, claims to have developed a program to do just that – predict future climate risk to help develop risk management practices better suited for addressing climate change.
The California based company just announced its “ClimateScore Global” this week, which it touts as an analytical tool to provide climate risk assessment data for every point on land through 2100. Jupiter designed this tool to predict future risk from heat, flooding, wind, wildfire, drought, earthquakes, and hail. If effective, this tool could help various industries better assess their risk to climate change. Climate risk assessment should be an important consideration for many industries. In the financial industry, lenders should take into consideration climate risk when deciding whether to provide a mortgage. If the property is in a highly climate vulnerable area, will the property still have the same value in 30 years?
Insurers should also take into account the possibility of severe climate events in high risk areas when deciding premium rates. Real estate developers and investors should complete climate risk assessments for any properties before purchase. Existing property owners should evaluate their climate risk to ascertain whether there are things they can be doing to protect themselves from possible climate events. Businesses and individuals involved in the manufacture and sale of goods should evaluate the possibility of business interruption due to climate events effecting any link along the whole supply chain. The energy industry should develop cost effective ways of incorporating renewable energy into its overall energy system.
With many of the United States flood maps remaining outdated, many homeowners and property owners do not fully understand whether they are at risk from climate events or the extent of that risk. Therefore, using tools such as Jupiter’s “ClimateScore Global” will enable a reevaluation of risk so that a plan can be developed. Many industries do not fully understand the extent of their climate vulnerability and it is essential for businesses to incorporate this additional consideration into any self-audit of risk.
CMBG3 Law’s Environmental practice group helps to navigate our clients through litigation, compliance, and regulatory matters, including issues related to climate change and climate risk management. For more information about our Environmental practice, please visit us or contact Alexandra Fraher for more information.