Norwegian Computing Center
Pilot #6: Embedding Climatic Predictions in Property Insurance Products
Partner(s):
GFT Italia
Pilot 6 develops climate-aware insurance tools to assess risks posed by climate change. By integrating climate data into insurance models, it enables more accurate property valuations, portfolio risk assessments and reserve management.
Detailed description and Objectives
To address the growing impact of climate change on property insurance, this pilot integrates climate data with financial models. The goal is to create innovative tools that assess climate related risks of existing obligations and helps optimizie an insurer’s investment portfolio, especially uncovering unanticipated exposure to risk.
Using datasets like the climate projections hosted on the Copernicus portal, downscaled climate models and financial time series, the solution enhances real estate valuations and portfolio analyses. This enables insurers to price liabilities accurately and identify strategies to mitigate climate-related risks.
FAME Applications
Pilot 6 uses FAME’s federated, controlled marketplace as a means to provide climate projections on the scale and level needed by financial institutions. Likewise, the marketplace offers an internal transaction system with which to monetize the data assets, as well as access to complementary assets already in the marketplace. FAME’s analytical toolset will also allow advanced analytics of the data assets.
Use Case 1: Climate Aware Real Estate Pricing
Use Case 2: VaR of an Insurers' Portfolio
Use Case 3: Climate-Aware Analysis of Alternative Portfolios
Use Case 1: Climate Aware Real Estate Pricing
This use case uses local climate predictions to understand the effect climate change will have on real estate valuations, providing an understanding of the risk to loss of collateral value that insurers can experience due to changing climate patterns. It creates a model that takes climate factors into account when estimate a property’s price and shows how these factors can be expected to change over time.
Use Case 2: VaR of an Insurers' Portfolio
This use case enables an insurer, or other investor, to understand the interaction between spikes in asset variability and weather-related events. By investigating this relationship, the portfolio manager can then project the changes in frequency with which these events are anticipated to occur due to climate change and therefore have an understanding of the implication for portfolio return variability.
Use Case 3: Climate-Aware Analysis of Alternative Portfolios
This tool compares different asset portfolios, suggesting adjustments to reduce vulnerability to climate change. It enables a portfolio manager to construct alternative portfolios that have reduced exposure to climate related risk.
To get in touch with a representative of Pilot #6, write to us at info@fame-horizon.eu
