In the face of escalating climate volatility, the financial and insurance industries are grappling with a critical intelligence gap, struggling to accurately price the risks posed by future natural disasters and distinguish between insured and uninsured potential losses. A landmark data-sharing partnership between S&P Global and Verisk, a global data analytics provider, aims to address this challenge head-on by creating a new industry benchmark for climate risk assessment. By merging their distinct and powerful datasets, the two firms are set to deliver an unprecedented level of sophisticated climate catastrophe exposure data. This collaboration responds directly to urgent market demand for more robust, forward-looking analytics, a need underscored by recent record-setting losses from natural hazards and mounting pressure from regulatory bodies and central bank stress tests. The initiative promises to equip stakeholders with the tools necessary to move from a reactive, compliance-driven posture to a proactive strategy focused on building long-term resilience against the increasingly severe impacts of climate change.
A New Framework for Risk Assessment
Integrating Distinct Datasets
The core of this strategic alliance revolves around a sophisticated, two-way integration of data designed to create a holistic view of climate-related financial risk. Verisk will contribute its physically based, near-present climate catastrophe risk data for integration into S&P Global Sustainable1’s Climanomics physical climate risk platform. This enhancement is crucial as it will empower users to accurately assess and quantify the significant gap between insured and uninsured losses resulting from climate change impacts. This distinction is vital for financial institutions, investors, and corporations seeking a comprehensive understanding of their total exposure. By providing a clearer picture of which assets and operations are under-insured or completely uninsured against specific perils, the platform will offer a more granular and actionable level of insight, filling a critical information void that has long hampered effective risk management and strategic planning in an era of climatic uncertainty.
Conversely, S&P Global’s climate-adjusted inland flood data will be integrated with Verisk’s advanced event simulations to generate a pioneering set of future-projected climate scenarios, modeled through the year 2050. This cutting-edge dataset will be delivered via Verisk’s renowned catastrophe risk modeling platform, Touchstone®. The integration marks a significant leap forward, allowing insurers to more precisely estimate future changes to their portfolio risk. It achieves this by translating the complex, scientifically-grounded impacts of climate change on flood intensity and frequency directly into quantifiable insurable losses. This forward-looking capability moves beyond historical data, which is becoming an increasingly unreliable predictor of future events, providing the insurance sector with a more dynamic and scientifically robust tool for underwriting, portfolio management, and long-term capital allocation strategies in a rapidly changing environmental landscape.
Projecting Future Climate Scenarios
The forward-looking models developed through this partnership are engineered to provide an unparalleled level of detail regarding future climate perils, specifically focusing on the evolving nature of flood risk. By combining S&P Global’s climate-adjusted hydrological data with Verisk’s sophisticated event simulation capabilities, the collaboration generates scenarios that project the intensity and geographical distribution of inland flooding events decades into the future. This modeling is not merely a linear extrapolation of past trends; instead, it incorporates complex climate science to simulate how atmospheric and environmental changes will alter weather patterns and, consequently, the severity of natural disasters. This allows stakeholders to visualize and quantify the potential impact of a “future normal” on specific assets and portfolios, a critical capability for making informed decisions about long-term investments, infrastructure development, and insurance coverage. The models are designed to be both robust and auditable, providing a defensible foundation for strategic planning and regulatory reporting.
This ability to project future climate scenarios provides a tangible advantage for organizations striving to build resilience. For the insurance industry, it means moving from generalized premium adjustments to highly specific, risk-based pricing that accurately reflects the future probability of loss for a given location. Insurers using the Touchstone® platform can now stress-test their portfolios against these scientifically grounded future events, leading to more resilient capital allocation and a better understanding of potential tail risks. For the broader financial sector, these projections offer decision-grade data necessary for meeting increasingly stringent regulatory disclosure requirements, such as those mandated by climate-focused stress tests. More importantly, it facilitates a strategic pivot from simply identifying risks for compliance purposes to actively mitigating them, enabling a more dynamic and forward-thinking approach to managing the financial consequences of climate change through 2050 and beyond.
Cross-Industry Applications and Impact
Bolstering the Insurance and Finance Sectors
For the insurance sector, this integrated solution directly addresses some of the most pressing challenges related to climate change. The ability to model future flood risks with greater precision helps to significantly reduce underwriting uncertainty, allowing insurers to develop more accurate and sustainable pricing strategies for properties in high-risk areas. This enhanced clarity also extends to portfolio management; by running sophisticated stress tests based on future-projected climate events, companies can gain a deeper understanding of their aggregated exposures and potential PMLs (Probable Maximum Losses). This, in turn, informs more effective capital allocation and reinsurance strategies, ensuring that firms remain solvent and capable of meeting their obligations even in the face of unprecedented catastrophic events. The partnership provides the tools to not only price current risk more accurately but also to strategically shape portfolios for long-term resilience in a world where climate-related perils are becoming more frequent and severe.
The finance industry stands to gain immensely from the decision-grade data produced by this collaboration, particularly in the realm of regulatory compliance and risk management. With financial regulators worldwide intensifying their scrutiny of climate-related risks, institutions are under pressure to provide transparent and robust disclosures. The integrated S&P and Verisk data provides a strong, auditable foundation for meeting these requirements, moving beyond high-level assessments to granular, asset-level analysis. Furthermore, the solution enables a critical strategic shift from basic, compliance-driven stress testing to active and dynamic risk mitigation. Financial institutions can now use these forward-looking insights to identify vulnerabilities within their lending and investment portfolios, engage with clients to encourage resilience measures, and make more informed capital decisions that account for the long-term financial impacts of climate change, thereby protecting shareholder value and contributing to broader economic stability.
Expanding Risk Intelligence for Assets and Real Estate
Asset managers can leverage this powerful analytical tool to significantly expand their climate and physical hazards risk analysis, leading to more sophisticated and resilient portfolio construction. The platform’s ability to clearly delineate between insured and uninsured risk offers a critical new dimension for evaluating potential investments. Understanding the full spectrum of a company’s or an asset’s exposure to physical climate risks—beyond what is covered by insurance—allows for a more accurate valuation and a clearer assessment of long-term viability. This insight enables portfolio managers to optimize their holdings by either divesting from assets with unacceptably high, uninsurable risks or engaging with companies to advocate for better risk management and adaptation strategies. Ultimately, this enhanced level of due diligence can protect investors from unforeseen losses and identify opportunities in companies and sectors that are effectively managing their climate exposure.
In the real estate sector, the combination of robust climate modeling and granular risk insights provides a dual advantage for identifying both vulnerabilities and opportunities. For developers and investors, the tool can be used to evaluate the long-term viability of potential projects, particularly in assessing risks related to inland flooding that may not be apparent from historical data alone. This is especially valuable for evaluating rural and undeveloped land, where risk exposure may be less understood. By identifying areas with lower future risk, the platform can highlight previously overlooked growth opportunities. For owners of existing property portfolios, the data provides a clear roadmap for implementing resilience measures, informing decisions on capital improvements, and negotiating insurance coverage. This proactive approach to risk management can enhance asset value, ensure operational continuity, and secure a more sustainable return on investment in a changing climate.
A Foundation for Proactive Resilience
The strategic partnership between S&P Global and Verisk provided a powerful, auditable foundation that empowered clients across key industries to manage climate risk with far greater precision. By merging their respective data analytics capabilities, the collaboration successfully bridged a critical intelligence gap, enabling the quantification of both insured and uninsured financial impacts from future climate events. This integrated solution moved the market beyond reactive, compliance-driven activities and fostered a new standard of proactive, resilience-focused strategy. The insights generated allowed insurers, financial institutions, asset managers, and real estate investors to make more informed decisions, refine their risk models, and ultimately build a more sustainable and climate-resilient economic future.
