Aon launches physical climate risk exposure assessment tool

A tool that assesses an organisation’s current and future exposures to physical climate risk has been launched by Aon. The Climate Risk Monitor helps clients visualise and understand their exposures to physical climate risk in order to enable better business decisions, said the broker.

It said the new tool assesses exposures to key chronic risks – drought, extreme rainfall, extreme heat, freeze and wildfire – under different climate change scenarios, providing diagnostic reports on individual asset and portfolio impact, as well as geographical visualisations.

“Risk managers can use this data to better understand climate risk and in turn inform property insurance placements for their organisations, collaborating with Aon’s brokers to help obtain optimal limits and renewals pricing,” said Aon. “As part of our risk capital capability, the firm brings expertise, relationships, and analytics to unlock capital, which is accessed across markets, geographies, or instruments.”

Liz Henderson, global head of climate risk advisory for Aon, said: “In developing Climate Risk Monitor, we utilised our wide-ranging scientific and business expertise to transform a wealth of well-validated climate data into useful information for clients. The importance of this output extends beyond physical risk management – having a better understanding of climate exposures can also assist with human capital decisions around health and talent.”

According to Aon, Climate Risk Monitor allows clients to assess evolving risk profiles and manage risk in locations with projected changes, and so informing risk transfer strategies, while assisting them to demonstrate climate understanding and planning to stakeholders, and supporting their climate disclosures. Aon said the tool can also help to better inform insurers’ risk selection, and strategies around pricing and reinsurance renewals.

Aon explained that the tool uses “standard IPCC (SSP-RCP) emissions scenarios over multiple time horizons to align with regulatory requirements. To produce relevant peril metrics, Aon leverages a range of global climate model outputs from different global academic and government institutions, as part of the Coupled Model Intercomparison Project Phase 6, whose results are used in IPCC assessment reports.”