Risks
Climate Change
Guy Carpenter’s Climate offering brings you an integrated range of services designed to address multiple facets of physical risks related to climate change, while leveraging the power of other Marsh businesses to also tackle all aspects of risk.
Creating Solutions for Insurers in a Changing Climate
At the end of 2024, global insured catastrophe losses exceeded $100 billion for the fifth year in a row. An evolving physical risk landscape coupled with population increases in more prone regions has required insurers to become significantly more sophisticated in their approaches to understanding catastrophe risk.
Companies developing and integrating robust climate change strategies into their risk management can benefit from the comprehensive offering at Guy Carpenter and across the Marsh enterprise. Our suite of climate advisory and modeling services supports insurers overcome the uncertainty of a changing climate and balance risks with opportunities in the near, medium, and long-term time horizons.
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Quantifying Climate Change Outcomes
As the insurance industry adapts from educating to quantifying climate change outcomes, Guy Carpenter has released a suite of climate change products. These are available to aid in regulatory responses, industry benchmarking, underwriting strategies and risk management decisions.
Guy Carpenter Climate Products
Catastrophe Model Adjustments
Provides probabilistic quantification of physical climate change risk, using catastrophe modeling tools suitable for different emissions scenarios and warming levels. This informs the financial impact of climate change on your portfolio to fulfil regulatory requirements and support exposure and risk management strategies.
Education
Guy Carpenter has a global team of climate scientists and regulatory experts equipped to understand the impacts of climate change for the insurance industry. Guy Carpenter publishes briefings on the latest science, regulatory requirements, market conditions and the implications for the insurance industry, and offers training and advice to support our clients in understanding this important topic.
Risk Ratings
Global risk rating products form multiple perils. These provide location level loss metrics in present and future climate to inform underwriting and exposure management decisions.
Model Evaluation and Suitability for Present Climate
Guy Carpenter can support clients with understanding how well catastrophe models represent the climate risk today.
In addition, Guy Carpenter offers a number of proprietary US hazard scores in present and future climate:
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Severe Thunderstorm
Guy Carpenter’s county-based risk score offers a holistic view of US severe convective storm (SCS) events. The SCS future climate risk score leverages the recent trends in environmental conditions conducive to tornado, hail, and extreme wind events to project future SCS risk.
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Wildfire
The climate-adjusted wildfire risk score provides a comprehensive view of wildfire risk and helps clients quantify risk across multiple levels, including risk selection, rate-making and strategic growth. The climate-adjusted wildfire risk score leverages downscaled climate models to project future risk at multiple time slices and emissions scenarios.
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Sea Level Rise
Guy Carpenter’s proprietary United States and Caribbean Sea Level Rise Risk Score offers a transparent approach to modelling rising sea levels. To better understand which locations are at the highest risk of coastal flooding in the future, multiple time horizons and emissions scenarios are considered.
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Hurricane
Guy Carpenter’s climate-adjusted Tropical Cyclone Risk Score combines several complex datasets using a transparent methodology, providing clients with a high resolution, model agnostic view of wind risk from tropical cyclones for multiple emission scenarios, ensemble metrics, and time slices.
Register for event updates from the Guy Carpenter CAT Resource Center
Guy Carpenter Climate Change Toolkit
Our Guy Carpenter climate change tools enable clients to quantify the physical impact of climate change on their modelled losses, based on scientific insight. This supports regulatory requirements, reinsurance and underwriting decisions, and internal risk management strategies.
Types of Climate Change Risks and Impacts
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Physical Risks
In the insurance context, physical risks are direct damage to insured assets by weather and climatic events. Climate change is increasingly influencing the frequency and severity of natural catastrophe perils, with physical climate risk exacerbating both acute and chronic threats.
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Transition Risks
Transitioning to a lower-carbon economy may entail extensive policy, legal, technology, and market changes to address mitigation and adaptation requirements related to climate change.
Spanning the Marsh Enterprise
Working in tandem with Marsh Risk, Oliver Wyman, and Mercer, Guy Carpenter is also able to provide services that span several other climate-related areas. These services include transition risk modeling, climate investment portfolio modeling, asset-level resilience surveys and scoring, supply chain modelling and commercial due diligence.
By applying a combination of modeling techniques, proprietary risk assessments and the latest in scientific research, you can prioritize your climate-related activities, while also benchmarking the success of your approach against industry peers.
Questions To Ask About Your Climate Change Strategy
Survey: Market Attitudes on Climate Change
Guy Carpenter conducts an internal survey every year of all its brokers globally, to assess how climate change is impacting reinsurance renewal negotiations. We gathered almost 300 responses, with findings across different themes:
- Quantification of climate risk: The number of insurers quantifying their climate risk has increased particularly in Europe and the UK, but less than half of global respondents are quantifying their climate risk.
- Perils: For the majority of regions, a wide range of perils were cited as of concern. Flood is a key peril of interest in relation to climate change in both Europe and Asia Pacific. There is also a focus on severe thunderstorm following significant hail events in Europe and activity in the US.
- Market actions: Markets are taking a wide range of actions in relation to climate change, from pricing and capacity decisions, to increased retentions, higher attachment points and exclusion of fossil fuel intensive activities. Over time, this could worsen the problem of unaffordable insurance and increase protection gaps, suggesting that there is still work to be done to properly understand and more effectively manage changing risk.
- Disclosure requirements: The request for additional disclosures from carriers also more than quadrupled, from 4% in 2021 to 20% in 2024, particularly around fossil fuel percentages in treaty programs in line with EU Taxonomy regulations. Regulatory disclosure requirements, including quantification of climate risk, are accelerating, for example with the introduction of United States National Association of Insurance Commissioners (NAIC) climate filing requirements from 2025.
- Ongoing engagement: Even if climate change did not directly influence negotiations at renewals, these discussions typically occur throughout the year as part of ongoing relationships, rather than at renewals.
Survey results are collected annually to track the evolution of market expectations around climate change.
Resources: Understanding Climate Change Risks
Climate Change—Supporting the Insurance Industry in an Evolving Risk Landscape
How to Address Climate Risk
Climate Resilience Hinges on Management of Physical and Transition Risks
Global Risks Report 2024
COP 28: Highlight of Recent Guy Carpenter Insights Around Climate
Staying Above Water: A Systemic Response to Rising Flood Risk
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