Nick Jessop, senior director of research at Moody's Analytics, talks about how his company has provided vital climate analytical tools for the insurance asset business
Climate risk initiative of the year - Moody's Analytics
This category saw a deluge of entries as asset managers sought to prove their climate credentials in what has become the topic of the day for the industry.
However, the winner was not an asset manager. Moody's Analytics got high praise from judges who were effusive about the company's understanding of insurers' "utilization of climate change information, from ORSA, TCFD, stress tests and regulatory requests", and the importance of creating tools to help insurers navigate those requirements.
The company's Climate Pathway Scenario Service is built on scenario generation software which has helped insurers' model asset and liability projections in the light of own risk and solvency assessment (ORSA) needs and Task Force on Climate-related Financial Disclosures (TCFD) requirements to quantify the financial impact from physical and transition risk.
The product's deterministic and stochastic scenarios capture the impact on market and credit risk associated with different temperature paths, covering a wide range of financial outputs including a full set of nominal and real yield curves, credit spread curves that incorporate default risk, inflation rates, exchange rates and assets return for a wide range of asset classes.
All this has helped significantly insurers looking to integrate climate risk into strategic asset allocation and investment selection processes, even as the subject matter has grown in importance in the Americas the last few years.
"Moody's Analytics is focused on this initiative because climate change is the biggest risk multiplier facing the world today," Nick Jessop, senior director of research at Moody's Analytics, said. "Urgent action is needed."