Assessing the Bottom-Up Financial Impacts from Climate Change Using Catastrophe Modeling: A Case Study of Australian Bushfire Risk

Over the past 30+ years, Moody’s/RMS has been at the forefront of catastrophe modelling, developing and supporting models for the global (re)insurance market. Those offerings bring together carefully calibrated stochastic simulations of extreme events with detailed assessments of the vulnerability of a wide range of assets, covering a wide range of perils over key insurance markets. The models, designed to fully capture the risk from today’s climate, have been validated against extensive geophysical observations and against hundreds of billions of dollars of claims data. As part of our offering, and using an extension of the same framework, we also provide for many of those models a view of future risk for a range of scenarios under climate change.

In this presentation, after a general overview of our climate change conditioning framework, we will focus on the specific case of Australian bushfire, a peril which has recently generated a lot of interest in the (re)insurance industry given the large number of recent headline-grabbing events. We will discuss how our CMIP6-based climate change hazard perturbations are derived, as well as the implications of our results for the insurance market. We will also put those results in the context of our other climate change-conditioned catastrophe model offerings available globally.