Zurich Insurance is experiencing strong demand for its climate change risk services following a \u201cparadigm\u201d shift in risk management that has seen the threat become an immediate area of focus, the company told Commercial Risk Europe.\r\n\r\nThe firm said risk managers are hungry for climate change data and tools to assess risks, develop solutions and meet reporting requirements, as the problem becomes a here and now, rather than emerging, issue for customers.\r\n\r\nThe Switzerland-based insurance group launched its Climate Change Resilience Services, which offers climate change risk analysis and mitigation solutions to corporate customers, in 2020. The insurer is working with a growing number of companies as they seek to understand their climate change exposures and fulfil their ESG commitments. The unit is based on a natural hazards-focused service that Zurich has been offering for more than a decade.\r\n\r\nThe majority of corporates are now looking at climate change risks, while the pandemic and war in Ukraine have shown that companies need to be able to deal with multiple risks at the same time, according to Amar Rahman, global head of Zurich\u2019s Climate Change Resilience Services.\r\n\r\n\u201cThere is a massive paradigm shift going on,\u201d Rahman said. \u201cBecause of the multiple risks that society and organisations face, traditional [risk management] thinking is moving from a focus on insured risks to global interconnected scenarios that historically were seen as long term and strategic,\u201d he told Commercial Risk.\r\n\r\nClimate change, in particular, is increasingly seen as a more near-term risk bringing increased volatility in extreme weather events and seasonal climate, explained Rahman. For example, South Africa suffered deadly floods in April this year but suffered a water crisis in 2018, he noted.\r\n\r\n\u201cThese risks are coming to the risk manager\u2019s table. We used to call these kinds of scenarios \u2018emerging risks\u2019. Now they are dealt with by risk managers as very high-probability risks. Even the language of risk managers and organisations is very different to just five or ten years ago,\u201d Rahman said.\r\n\r\nWhen it comes to climate change, companies need to think beyond physical and environmental risks, he said. They need to consider, for example, directors\u2019 and officers\u2019 liability and reputation, the impact on infrastructure and wider societal implications, according to Rahman.\r\n\r\n\u201cYou need to think [about climate change] in as wide a context as possible, firstly because of the complexity, and second because the solutions go beyond the organisation. The consequences affect society as a whole and thus local communities and authorities need to be involved in developing the solutions. You need to get everyone involved. If you have a facility that is totally protected, it won\u2019t help you if your employees can\u2019t reach the site. Or if the local power or water network is disrupted,\u201d he said.\r\n\r\nClimate change is a complex issue that touches on social, economic and political spectrums, as well as insurable risks. There are also many uncertainties and complexities around climate science, government policy and climate change\u2019s interaction with other risks. It is therefore difficult for risk managers and their organisations to know where to start when assessing climate change risks, said Rahman.\r\n\r\n\u201cWe show people how to do this in a methodical and systematic way, in bitesized chunks. There is no silver bullet. You can\u2019t do that process \u2013 identify, assess, solve and monitor \u2013 in one go. It starts with small steps and the analysis evolves over time. With each iteration, you bring in more granular and diverse data, more people in your organisation and more perspectives,\u201d he said.\r\n\r\nRisk managers should first identify the climate change risks, or \u201cpain points\u201d, in their companies and wider value chains that would have the biggest impact on their organisation, said the expert. For many companies, it would also make sense to start analysing the impact of climate change on physical risks, where data, experience and risk modelling tools are well established, said Rahman.\r\n\r\n\u201cThis is an iterative process. There is no single consequence of climate change, there is a cascading effect to the event. The first tier of the effect is physical but there are subsequent consequences \u2013 which are sometimes harder to quantify \u2013 that follow from that,\u201d he said.\r\n\r\n\u201cFor example, say you lose a location [due to extreme weather]. That could have an impact on your reputation, your market share and on society, if the employees are unemployed for a period of time with no income. Each of these is a level of the cascading effect,\u201d he added.\r\n\r\nZurich\u2019s Climate Change Resilience Services has been working with a growing number of companies to help them identify and assess climate change risks and develop solutions.\r\n\r\nThe emphasis is strongly on risk management to reduce the risk, for example through engineering solutions like flood defences, value\/supply chain planning and emergency response planning, explained Rahman, who is pleased with the demand for Zurich\u2019s climate change services.\r\n\r\n\u201cWe provide a methodology, tools and data, as well as risk perspectives, and we also work with companies to develop solutions at an operational and strategic level... Interest is growing all the time. Some days I talk to two or three customers, and the discussions become increasingly detailed at each session, involving an ever-growing range of people within their organisations. There is a lot of interest in what we do,\u201d he said.\r\n\r\nWhen Zurich\u2019s Climate Change Resilience Services team starts working with a company on a particular problem, it often quickly grows into a deeper relationship, according to Rahman.\r\n\r\n\u201cWe sometimes get a request to assess two or three locations, and then it evolves from there. Or we start at the portfolio of production facilities or suppliers, which highlights a problem at a specific site. You start off with one problem and come up with a solution. But in that process, it opens eyes to other risks customers were not aware of,\u201d he said.\r\n\r\nAnita Horgosi, Zurich\u2019s sustainability business development director for the Climate Change Resilience Services team, said demand for climate change risk assessment services is growing exponentially. \u201cWe are hiring in almost every Zurich Resilience Solutions location, including climate scientists and engineers,\u201d she said.\r\n\r\nHorgosi said risk managers can play an important role in assessing climate change risks and developing mitigation solutions.\r\n\r\nRisk managers also play a role in climate change disclosure, in particular under the Task Force on Climate-Related Financial Disclosures (TCFD) framework, which is on the way to becoming the de facto standard, said Rahman.\r\n\r\n\u201cRisk managers are becoming involved in that process and need help to identify, assess and quantify the different risks identified by [the TCFD] framework. They are also coming to us with more strategic questions. Their scope was previously operational \u2013 how do I protect my site against flood? Now they come to us and ask: how do I deal with water stress in the next five to ten years? Not only flood, but lack of water for production,\u201d he said.\r\n\r\nRisk managers will increasingly have access to more sophisticated tools and data to help them assess climate change and sustainability risks, said Horgosi.\r\n\r\nZurich is looking at ways to integrate data and insights built up over decades and drawn from the 65,000 site assessments carried out by its risk engineering team each year. It is also collaborating with technology startups, like the winners of the Zurich Innovation Championship, which are developing data collection solutions and dashboards to target climate action, said Horgosi.