Climate models are becoming more and more critical: Aeolus

Insurance and reinsurance companies are naturally at the forefront of understanding climate change risk, and as the debate about climate and resilience intensifies around the world, climate models are becoming increasingly in addition, according to Aeolus Capital Management Ltd.

Artemis, our sister site focused on Insurance Related Securities (ILS), recently hosted a live interview with Dr Pete Daily, Head of Research, and Frank Fischer, Partner and Director of Analytics at Aeolus, Manager of investment fund specializing in reinsurance and retrocession.

For the most part, the company targets real estate catastrophe exposures in its underwriting, which means climate change and risk is a hot topic for the ILS manager, as they are for the broader ILS and reinsurance industries. .

Given Aeolus’ tenure and the notable increase in the frequency and severity of secondary hazard events, such as floods and wildfires, Dr Daily and Fischer explored the importance of risk models climate and, above all, how these tools evolve and benefit their work.

“It is becoming more and more critical every day. Not a day goes by that I don’t see an article or talk to a colleague about climate change, ”said Dr Daily.

“The insurance and reinsurance industry is truly at the forefront of understanding the risks associated with climate change. This is nothing new for us, climate analysis has been a fundamental part of risk management for more than twenty years that I have worked in the industry, ”he added.

Dr Daily went on to explain that climate analysis has become an additional layer to what Aeolus already understands and tries to optimize, as part of its holistic approach to risk management.

“We look at the past and the future, but most importantly we look at the present and how the current climate regime may affect risk in the year and years to come,” said Dr Daily.

In addition to discussing Aeolus’ use of climate modeling, data and analysis, and how this is factored into decision-making, Fischer explained that climate change is also at the center of his work. concerns.

“We need to spend a lot of time educating our investors about this and providing them with the data and research needed to properly value the asset class,” said Fischer.

“Our job is to give them all this information and try to get, as much as possible, a real perspective of the risk so that they can make good decisions.

“Ultimately, our job is to inform our investors. These are ultimately our partners and our research and investment in models is going to be a key part of their decision-making process.

“In any industry ours is no different, we have to constantly challenge our assumptions and try to improve the product. It is therefore evident that the impact of climate is at the forefront and constitutes a key area of ​​research, ”said Fischer.

The full video interview is embedded below and can also be viewed in its entirety, along with previous Artemis Live video interviews.