Aon has announced the launch of a centre of excellence to address the weather and climate risks faced by governments and businesses globally.
The new Aon Weather & Climate Risk Innovation network will assist clients to meet demands to evaluate the potential impact of climate risk and weather on their operations, and develop comprehensive risk financing strategies to improve resilience, said the broker in a statement last week.
The network brings together sector knowledge, experience and expertise from across Aon – supported by advanced data, analytics and partnerships with innovative firms – to offer a dedicated center of excellence that will assist clients in risk assessment, risk mitigation, and risk transfer.
Focused on quantifying risk, lowering the cost of capital for climate mitigation solutions, and closing the capital efficiency gap in infrastructure and chronic weather risks, the network builds on the risks identified by the G20’s Financial Stability Board recommendations on climate risk disclosure.
Aon Benfield’s global head of weather Kurt Cripps said, “Given that most businesses are exposed to weather volatility at different points in their operations, there is clearly a demand for tailored and effective climate and weather solutions. Our data and technology enables us to offer firms customised parametric solutions that provide protection for the climate volatility and weather events most likely to adversely impact their revenues and profitability.”
Independent studies have shown that for the vast majority of businesses, adverse weather can impact profitability on a day-to-day basis, while climate risk has become a core concern for many clients, as well as investors, who demand the companies in which they invest have a robust risk mitigation strategy in place.
Aon global head of resilience and sustainability Greg Lowe said, “There has been a shift in the landscape regarding how companies, investors
, and regulators view weather and climate risk. Collectively, this growing awareness has brought insurance tools, such as catastrophe modelling and hazard maps, and instruments, such as catastrophe bonds, to the fore. In light of this, we have decided to strategically combine the capabilities that we have across our firm to address what has been identified as a critical change for businesses and society.”
Aon’s Impact Forecasting division has estimated that weather events in 2017 caused $344bn in global economic loss – a loss which was largely insured. Meanwhile, the supply chain disruption from events such as the 2011 Tohoku Earthquake and Thai floods reinforced the exposure the global economy has to natural disasters.
The company’s tailored weather solutions include parametric weather products – made possible through advanced satellite imaging technology, ground-based data, and actuarial analysis – which are assisting businesses in sectors as diverse as construction, energy (renewable and non-renewable), and retail to protect themselves against weather events that could adversely affect revenues.
Aon has also assisted governmental and intergovernmental entities to reduce their exposures to natural catastrophe events; for example, in February the firm completed the largest ever earthquake catastrophe bond on behalf of the World Bank, which also represented the largest ever sovereign risk transfer.