Our Lineup!

New Orleans Forum on Climate Linked Economics

Monday, January 13, 2025:

Managing Systemic Risk and Building Resilient Communities

Keynote Speaker in Climate Linked Economics: Moving Day

Susan Crawford, Carnegie Endowment for International Peace and Harvard Law

830am - 915am

The effects of rapid climate change are already being reflected in insurance markets in the US, and will soon be felt in pockets of property holdings as they suddenly reprice. What can public and private institutions do to help Americans continue to lead thriving lives, in a legal and financial context that is devoted to keeping the status quo in place?

Susan Crawford is Senior Fellow, Sustainability, Climate, and Geopolitics, at Carnegie Endowment for International Peace. She is also a professor emeritus at Harvard Law School. She is the author of Charleston: Race, Water, and the Coming Storm, Fiber: The Coming Tech Revolution—and Why America Might Miss It, Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, and co-author of The Responsive City: Engaging Communities Through Data-Smart Governance.

She served as Special Assistant to the President for Science, Technology, and Innovation Policy and co-led the FCC transition team between the Bush and Obama administrations. She also served as a member of Mayor Michael Bloomberg’s Advisory Council on Technology and Innovation and Mayor Bill de Blasio’s Broadband Task Force.

She was one of Politico’s 50 Thinkers, Doers and Visionaries Transforming Politics in 2015; one of Fast Company’s Most Influential Women in Technology (2009); and one of TIME Magazine’s Tech 40: The Most Influential Minds in Tech (2013).

Invited Speaker in Climate Linked Economics: Innovation in sustainability at the New Orleans Ernest N. Morial Convention Center

Linda Baynham, Director of Sustainability and Corporate Social Responsibility, Ernest N. Morial Convention Center

915am - 930am

When thinking about booking a huge convention, including for the AMS annual meeting, sustainability initiatives are a crucial component in the decision-making process. However, being good stewards of the environment and the local community is no easy task when inviting thousands to travel to your city. In this talk, Linda Baynham, Director of Sustainability and Corporate Social Responsibility will show us how the New Orleans Ernest N. Morial Convention Center tackles sustainability, the benefits of these programs, the economics of sustainability including while renovating, and why it is important for big facilities to acknowledge and reduce their impacts.

ClimateDesk: Leveraging Premier Climate Model Ensembles and Advanced Downscaling Techniques for Business-Ready Insights

Sean Miller, Viasala

930am - 945am

Enterprises require reliable climate projections across various timescales to effectively identify asset-level risk and proactively implement mitigation strategies in response to climate change. Traditionally, climate modeling organizations focus on either near-term or long-term forecasts, each with different spatial resolutions and expected outcomes. This inconsistency can make it challenging for users unfamiliar with weather and climate science to accurately interpret the forecasts' implications.

ClimateDesk provides probabilistic insights for temperatures, precipitation and wind speeds, catering to a wide range of use cases by consolidating, harmonizing and integrating diverse forecasts from reputable climate modeling groups into a single platform. This platform covers timescales from sub seasonal periods to centennial projections to the year 2100, maintaining a consistent 0.25-degree spatial resolution globally. Additionally, it has the capability to refine forecasts to a high resolution of 1 km for any region.

The presentation outlines the design of blended climate forecasts, highlighting its multi model and multiscale ensemble system and the probabilistic forecast insights. It also discusses validation results against observations and comparable publicly available climate forecasts. The evaluation of 2015-2023 hindcasts using categorical metrics for various events and thresholds demonstrates that the system consistently achieves high accuracy and reliability. The hindcast evaluation for the 1991-2020 base period shows improved continuous rank probability scores across various climatic conditions, emphasizing the system's enhanced ability to provide accurate probabilistic forecasts for risk assessment and strategic planning.

Seasonal Amplification of Wind Stilling Compounds Energy Risks in a Warming Climate

Gan Zhang, University of Illinois at Urbana Champaign

945am - 1000am

Wind energy is key for reducing greenhouse gas emissions and meeting increasing energy demand. Long-term changes in wind resources were extensively studied but notable gaps remain. Meanwhile, the temporal changes and compounding risks received little attention. Here we analyze large-ensemble climate simulations and show that anthropogenic warming can contribute to significant wind stilling, particularly in the warm season of the northern hemisphere midlatitudes. The stilling is related to the amplified warming of the midlatitude land and mid-to-upper troposphere. At representative US sites, the stilling will unlikely threaten the cost-competitiveness of onshore wind relative to fossil energy. However, its impact can exceed a large interest increase and make wind energy less cost-competitive than other clean energy. Moreover, the summertime stilling coincides with surging cooling demand in the midlatitudes and may bring challenges to energy security. The findings about wind stilling and its implications may help inform future energy investments.

Keynote Speaker in Climate Linked Economics: The Impacts of Extreme Weather, Climate Change, and Developments in Science and Technology on the Future of the US Power Grid

Robert F. Brammer, American Bar Association, University of Maryland, Brammer Technology

1045 am - 1130am

This presentation explores the complex interactions among extreme weather, climate change, and advancements in science and technology, all of which will significantly impact the future of the U.S. power grid. In 2022, the US power generation market had a value of $1.7T, and 60% of our electricity came from burning fossil fuels, mainly coal and natural gas, which led to 25% of all US GHG emissions. Over the next 15-20 years, the grid will face increasing challenges largely due to the rising frequency and intensity of extreme weather events driven by climate change and the growth of demand for electric power (e.g., from electric vehicles, data centers, etc.).

These challenges will strain infrastructure, lead to costly disruptions, and necessitate significant grid modernization and resilience investments. Estimates of the cost to modernize the power grid over the next 15- 20 years range from $2T to $7T, while the US Department of Energy estimates that power outages cost the US economy $150B per year. Developments in smart grid technologies (including AI technology), climate science, and weather forecasting offer potential solutions to enhance grid reliability, reduce greenhouse gas emissions, and better prepare the US population and economy for the uncertainties of a changing climate.

We will analyze the economic implications of these factors, highlighting how the U.S. power grid's position in the economy makes it a focal point for both adverse impacts and emerging business opportunities (e.g., from decarbonization, renewable energy, etc.). The presentation will also address recent legislative, regulatory, and legal developments, such as the Inflation Reduction Act, the new interconnection rules from the Federal Energy Regulatory Commission, and litigation concerning the Clean Power Plan, which are shaping the grid's evolution. As the U.S. power grid undergoes this transformation, it will play a critical role in the nation's efforts to meet climate goals, integrate renewable energy, and ensure a stable, sustainable energy future.

Law and Order: Voluntary Carbon Markets

Frank Michael Shanny, University of Maryland

1130 am - 1145am

Businesses show signs that transitioning to a net-zero economy will take longer than expected, with many companies already falling short on ESG (environmental, social, and governance) goals. Since the Industrial Revolution, humans have emitted unprecedented amounts of carbon dioxide, which has an atmospheric lifespan that lasts centuries and has intensified the greenhouse effect. We are currently adding more carbon dioxide from anthropogenic sources than is being removed. The voluntary carbon market (VCM) offers financially plausible and potentially lucrative ways for businesses to reduce and remove their emissions, presenting a promising future for financial opportunities. Since VCMs are still in their infancy, the slow development of integrity standards and proper infrastructure is inhibiting stakeholders from fully capturing the benefits.

Using Bloomberg New Energy Finance and the Bloomberg Terminal, we studied compliance and voluntary market data available on those platforms. Bloomberg products provide industry news, carbon credit prices, and models that highlight significant trends in the market. Utilizing carbon registries’ public databases, we analyzed the quality of multiple offset projects and determined a fair value for the issued credits. It is critical that offset pricing transparency increases in addition to solidifying the scientific certainty of projects. Regulatory emissions trading systems around the world have successfully raised carbon prices, but voluntary markets are struggling to hold validity. To restore scientific confidence and investor sentiment in offsets, VCMs should adopt certain characteristics of compliance markets. Basedon our findings, we believe a blend of VCM and audited compliance procedures can help maximize the objects of both markets from an environmental and financial perspective. If acceptable standards and audit practices can be established, carbon markets can exceed $1T by 2030.

Effects of Predictive Wind Speed, Temperature, and Cloud Cover Change on Co-Located Wind and Solar Energy Farms in Maryland

Elana Naide, University of Maryland

1145 am - Noon

With changing climates and financial incentives to develop clean energy, the appetite for renewable energy is expected to increase in the foreseeable future. However, building plants can be costly and difficult to adapt to significant weather changes.

This project aimed to determine the ideal location and cost allocations for a co-located plant in the Delaware – Maryland – Virginia (DMV) region. Co-located plants are multifunctional energy plants with wind, solar, and battery components. Plants can take advantage of cyclical, predictable sunshine and variable wind while storing energy in their battery components. Understanding asset allocations towards each component combined with trends in climate (mainly wind speeds, temperature, and cloud coverage, which affects power production) is critical in assessing plant viability.

Energy production from each component was calculated using the Co-Located Storage, Wind & Solar Model (CSWSM) tool developed by Ulimmeh Ezekiel at BloombergNEF. Financial data, industry costs, and projections were sourced from the Bloomberg Terminal. We modified the CSWSM with wind speed, cloud coverage, and temperature data forecast using the Regional Climate-Weather Research and Forecasting Model (CWRF) from Dr. Xin-Zhong Liang from the University of Maryland.

Testing five locations across the DMV region, it was determined that Ocean City, MD, and Annapolis, MD, had the greatest potential financial value of $16.2M (equity return 14.3%) and $11.5M (equity return 13.2%), respectively, given their region’s long-term climate outlook. Despite concerns that rising temperatures could potentially reduce solar panel efficiency, newer technology will mitigate these effects, ensuring their viability in the DMV region.

Panel Discussion on Climate Linked Economics: Climate Risk Management in Banking

Moderated by, Josh Hacker, Jupiter Intelligence

145pm - 300pm

Large banks and mortgage investors have recently adopted climate and catastrophe models. Explore the assumptions, limitations, and application of these tools to bank risk management. Special focus on problems with model duration, resolution, and translation to existing probability of default and loss given default frameworks.

Panelists Include:

• Kingsley Greenland, Verisk

• Gan Zhang, University of Illinois at Urbana Champaign

• Josh Darr, Guy Carpenter

Building for Tomorrow: Climate Adaptation in Real Estate

Panel Discussion in Climate Linked Economics: Navigating Climate Risks and Economic Shifts in Real Estate

Moderated by Brock J. Burghardt

430pm - 600pm

The intersection of climate change and real estate presents complex challenges that demand more proactive adaptation and innovative solutions. This session will explore the multifaceted risks and opportunities linked to climate change impacts on real estate, insurance, and economic value, bringing together experts to present actionable strategies that enhance resilience while addressing ongoing gaps.

Key Topics:

Climate adaptation modeling: Insights into how modifications in construction practices and materials can mitigate the risks posed by severe weather, with focus on hurricane wind. Accounting for structure characteristics including enhanced roof-to-wall connections, wall-to-Floor-to-Foundation Anchorage, improved shutters, and improved design code and enforcing of the code results show an average of 38% and 44% decrease in average annual losses from hurricane wind in the state of Florida and across the U.S Gulf and East coast.

Underwriting Challenges: The financial strain on insurers caused by rising insured losses, exacerbated by natural disasters and inflation, leading to higher costs for homeowners. Insurers providing policies to homeowners suffered a $15.2 billion net underwriting loss in 2023, the worst since at least 2000 and more than double the previous year’s losses.

Population Growth in High-Risk Areas: Analysis of how increased population in vulnerable regions, such as Florida, California and Texas, contributes to higher insured losses. These regions accounted for half of the country’s population growth in the 2010s, increasing the exposure to natural disasters.

Regulatory Hurdles: Discussion on the regulatory environment in the US, including state requirements for pricing approvals, and the impact on the insurance market's stability and affordability. This includes the impact of government actions and subsidies on risk perception and investment decisions, leading to potential moral hazards. In states like California, the delays in getting pricing approvals have caused market instability. Also discussed is the need for forward-thinking in building design, suggesting that current construction practices may fall short of meeting the demands of a changing climate.

Climate Change: Examination of how climate change is (and isn't) intensifying weather-related disasters, increasing the frequency and severity of storms, floods, and wildfires. While insurance experts often argue that climate change is making storms, floods, and wildfires more extreme, the facts are far more complex and nuanced than the media reports.

Severe Convective Storms (SCS) Losses: Insight into how SCS losses in 2023 drove insurance and reinsurance market losses of $50 to $60 billion. Future active seasons could see even higher losses. The session will highlight market findings on the inadequacies of first-generation catastrophe risk models in capturing the true impacts of SCS.

Economic Impact on Property Values: Exploration of how rising insurance costs and loss of coverage are driving down property values in high-risk areas, creating additional financial stress for property owners and investors. The affordability crisis has sparked a pullback by insurers from disaster-hit areas, exiting markets or driving up prices, which in turn impacts property values.

Industry Response and Innovation: Presentation of new tools and techniques being developed to improve resiliency in the real estate sector, highlighting industry examples of successful adaptation strategies. Insurers are looking for ways to manage the escalating coverage demands while dealing with skyrocketing insured losses.

Future Opportunities and Gaps: Identification of existing gaps and opportunities for further research and development to enhance the sector's resilience to extreme weather events, including building practices. The session will address the need for improved risk models and the development of sustainable insurance and reinsurance strategies to cope with increasing losses from severe convective storms and other natural disasters.

European Perspective: Diagnosing the drivers of changing insured losses year-on-year is an important component of developing a sustainable insurance portfolio. The common assumption is that losses are increasing year-on-year. However, there are many factors that could drive that change in losses: economic versus insured losses, inflation, change in wealth over time, movement toward riskier locations as well as changes to the frequency and severity of Europe wind and flood events. This presentation will quantify each of the above factors to determine drivers of changes in losses over time.

Panelists:

• K. Mulder (Liberty Mutual Insurance): Insured Losses from European Natural Catastrophes: Is there a trend over time?

• Stephen B. Bennett (The Demex Group): Climate Shocks: Rising Insurance Costs and Real Estate Resilience

• Dr. Jacques Gordon (University of Wisconsin-Madison): Discussing the multifaceted climate risks facing real estate and necessity of integrating adaptation strategies

This panel will address the challenges that remain in real estate, fostering a dialogue on the collaboration needed to build resilience and ensure the long-term viability of properties in the face of escalating climate risks.

Tuesday, January 14, 2025

Understanding and Assessing Climate-Induced Population Migration

Neha Schollmeyer, Pricewaterhouse Coopers, LLC

830am - 845am

Climate-induced population migrations have emerged as an important issue in recent years, likely to be exacerbated in the future with the increasing frequency and severity of weather events. This phenomenon has far-reaching implications for various sectors including commercial real estate investors / developers, retailers, and residential mortgage lenders. By recognizing the potential impacts of these migrations, such as changes in demand for housing and retail space, as well as the associated risks to mortgage portfolios, these industries can proactively adapt their strategies to help make informed decisions. We aim to provide real estate and retail leaders with a methodology to help evaluate a region's adaptive capacity to understand community resilience and inform business decisions.

This presentation will begin by examining how climate-induced migrations are already occurring today, highlighting key indicators such as high exposure to physical risks and lack of insurance coverage. Examples will be presented, including the experience of New Orleans after Hurricane Katrina and more recent movement from Phoenix, AZ due to increased heat. These examples aim to illustrate the potential immediate and long-term effects of climate-induced migrations on communities.

We propose a framework for evaluating adaptive capacity and community resilience, in line with the Task Force on Climate-related Financial Disclosures (TCFD). This framework will be applied to areas with varying levels of physical risk exposure and existing climate resilience plans, in order to identify potential future “climate havens”. By understanding the adaptive capacity of a region, real estate investors and developers can identify areas that may be more likely to withstand climate-related challenges and offer long-term growth potential.

Additionally, the presentation will emphasize that investors and developers should understand the long-term physical risk exposure of their investments. By considering the potential impact of climate-induced migrations, such as changes in demand and property value, stakeholders can make strategic business decisions that align with the realities of a changing climate. The presentation will conclude by emphasizing the importance of integrating climate resilience into business strategies and fostering sustainable and resilient communities.

Ultimately, our findings will provide real estate investors, developers, and retailers with valuable insights into the potential impacts of climate-induced population migrations. By understanding the current and future state of migrations, evaluating adaptive capacity, and considering long-term physical risk exposure, stakeholders can make informed decisions that promote community reliance and enable the long-term success of their investments.

Climate Price Bubble: Economic Impact in US Housing Market

Wahib Ghazni, Jupiter Intelligence

845am - 900am

This research investigates the presence of a climate price bubble in the U.S. housing market, driven by the underpricing of acute wind and wildfire risks. We focus on how recent sharp increases in homeowners insurance premiums cannot be fully explained by rising construction costs and other conventional factors. Instead, we argue that these increases are a function of underlying forward-looking climate risks. Using the representative US census sample to model the U.S. $65.01 trillion housing market comprising 140 million units, we assess the distribution and intensity of these physical climate risks, projecting their dynamic changes over time. Our analysis examines whether current insurance premiums accurately reflect these acute risks by comparing existing market premiums with those derived from an advanced forward-looking physical climate risk model developed by Jupiter Intelligence. Based on our calculations, the total climate economic valuation impact is estimated at around $2 trillion, of which a large fraction is not currently priced through the property insurance market and is not reflected in existing housing market valuations. These findings have crucial implications for anticipating potential market corrections and understanding the broader economic consequences of mispricing acute climate risks in the U.S. housing market.

Role of Insurance, Equity, and Liquidity in Post-Flood Financial Resilience of Residential Mortgage Borrowers

Kieran Patrick Fitzmaurice, University of North Carolina at Chapel Hill

900am - 915am

Uninsured property damage from flooding can place a major strain on household finances and thereby increase the likelihood of credit events such as mortgage delinquency and default. Few studies have examined how the pre-flood financial conditions of mortgage borrowers—such as their outstanding debt, home equity, and liquidity—affect the relationship between uninsured damage and subsequent mortgage credit risk. This study investigates the effects of uninsured flood damage on the financial stability of residential mortgage borrowers in Eastern North Carolina from 1996 to 2019. We integrate property-level data on key financial variables (e.g., damage costs, property values, mortgage balances) to quantify the number of borrowers meeting the necessary preconditions for default due to liquidity constraints, negative equity, or a combination of both factors. Over the 24-year study period, we evaluate the financial repercussions of seven federally declared disasters, including Hurricanes Florence, Matthew, and Floyd. These events caused $6.5 billion in flood damage within the study area, with an estimated $5.1 billion (79%) being uninsured, and repeatedly flooded properties accounting for a disproportionate share of this total. Mortgages at risk of default due to uninsured flood damage generated over $185 million in financial risk to borrowers (measured as lost equity after default) and over $244 million in risk to lenders (measured as unpaid principal lost given default), with a large proportion of these risks stemming from recently originated loans on lower-valued properties. The analysis highlights the role of negative equity and cashflow problems in driving credit risk among flood-affected mortgages and quantifies the magnitude of potential losses held by borrowers and lenders. By providing highly resolved mapping on which households are most vulnerable to mortgage default in the aftermath of a flood, these results may inform the nature and targeting of interventions to enhance the disaster resiliency of the U.S. housing finance system.

The Effect of Insurance Premiums on the Housing Market and Climate Risk Expectations

Shan Ge, New York University

915am - 930am

Climate change threatens to worsen natural disasters and increase the cost of insuring against them. We study how insurance costs affect the housing market using a 2013 reform that raised flood insurance premiums for properties discontinuously around flood zone boundaries and construction year cutoffs. Using a triple-difference design, we find that treated homes experience a 2% relative decline in transaction prices. This effect is partly driven by increased expected risks triggered by higher premiums, rather than a pure cash-flow channel. The price effect is three times as large for homes exposed to long-term sea level rise, suggesting that insurance pricing can accelerate the incorporation of climate risk into asset markets. Higher premiums induce more rebuilding of treated homes, as well as reduce mortgage uptake as the required insurance becomes more costly.

Modeling Weather and Climate for Applications in Insurance and Reinsurance

WUIs to Watch: Understanding Evolving Insurance Risk in the Wildland Urban Interface

William D Stikeleather, Guy Carpenter

930am - 945am

The 6th IPCC Assessment Report showed that climate change is increasing the frequency and intensity of weather conditions that are conducive to intense wildfires in the United States. Simultaneously, expanding development in the Wildland Urban Interface (WUI), the transition zone between wilderness and land developed by human activity, across the Western United States has increased insurer exposure to wildfire threats. This combination of changes in climate and population patterns has put pressure on the insurance industry, necessitating the development of increasingly granular wildfire risk products for vulnerable communities.

Guy Carpenter has developed a present-day Wildfire Risk Score and a climate change risk score, to quantify how different emissions pathways could modify future wildfires and resulting insured losses. To create the climate change risk scores, weather parameters obtained from downscaled climate simulations are used to construct projections of Fire Weather Index (FWI) for an ensemble of models under multiple emissions scenarios. Observed relationships between FWI, burn area, and insured loss values are used to translate FWI to insured losses for the climate model simulations. Preliminary results have shown that the western United States is projected to log the largest increases in wildfire risk which agrees well with the recent observed trends.

In conjunction with the climate adjusted wildfire risk scores, Guy Carpenter has developed an Area of Concern (AOC) tool to capture the areas of the country that have both high wildfire risk today and are projected to have the largest wildfire weather changes due to a warming climate. With a resolution of 30 meters, the AOC maps can resolve the abrupt changes in wildfire risk that are characteristic of the WUI. Intersecting the AOC maps with insurance companies’ portfolios provides unique insights that can inform growth and accumulation reduction strategies while also supporting the development of sustainable insurance practices across the country.

Flood Climate Adaptation Modeling

Mahmoud Khater, CoreLogic, Inc.

The intensifying impacts of climate change, characterized by more frequent and severe weather-related disasters, are placing the real estate sector under significant pressure. To address escalating insurance premiums and potential loss of coverage in high-risk areas like the US Gulf Coast and wildfire-prone regions, it is critical to develop resilient building practices. Our climate adaptation modeling explores the potential of modeling building adaptations in future climates, providing insights into how modifications in construction practices can mitigate the risks posed by severe weather. Here, we present FEMA’s recommended mitigation measures and the CoreLogic’s “Climate-Coupled Catastrophe models”TM (C3TM Models) and our modeled adaptation scenarios for U.S. Flood (coastal and inland).

Using the high emissions scenario SSP5-8.5 for analyzing climate projections to show maximum impact and potential disaster scenarios, we investigated the role of building adaptations in future climates, focusing on how these modifications can reduce vulnerability and economic losses from floods. Our study employed sophisticated climate projections and housing expansion driven by population growth combined with engineering simulations to evaluate the effectiveness of various building mitigation strategies. These novel strategies include improved design code for future constructions. For this, we modelled the effects of various First-Floor Heights (FFHs) on flood losses, representing different levels of mitigation efforts (e.g., low, medium and high). CoreLogic’s analysis finds that under the high emissions climate scenario, SSP5-8.5, by 2050, 100-year inland floods will become more frequent throughout the US. On average in this scenario, a 100-year inland flood event at present will become as frequent as a 20 to 60-year event in 2050, depending on the location. At the national level, there will be a 100% increase in flood risk when both hazard and population growth are considered, which approximately twice as much an increase more than when construction expansion is not considered. The proposed building code enhancements reduce flood risks across the US. Under a high mitigation approach, the percent increase in flood risk will drop from 100% to 65%.

The models generated from this research aim to provide developers, community planning officials, property owners and buyers, and policymakers with actionable insights for constructing buildings capable of withstanding future climate conditions. The research highlights the importance of forward-thinking, proactive building standards, suggesting that current construction practices may fall short of meeting the demands of a changing climate. Additionally, it identifies significant gaps in existing adaptation measures, proposing areas where further innovation and research are necessary. By modeling the impact of building adaptations on future climate resilience, this study offers valuable guidance for ensuring the durability and sustainability of real estate investments, particularly in regions most vulnerable to climate change.

The inclusion of disaster management perspectives in this study underscores the critical intersection of climate science, the full cycle of emergency management, and adaptive infrastructure planning, highlighting the FEMA's commitment to mitigating disaster impacts through evidence-based policy. Nationwide, FEMA collaborates across federal, state, and local levels to promote standards and resources that enhance community resilience to natural hazards. By providing data-driven insights on adaptive building practices, FEMA equips government agencies, developers, and insurers with practical strategies for reducing flood risks under future climate scenarios. FEMA’s supplementary role in this research/paper offers a valuable perspective on the translation of climate projections into actionable developmental practices which do not exacerbate the needs of emergency management professionals across the country, illustrating how integrated disaster planning can address heightened risks from climate-induced flooding.

This collaboration not only strengthens alignment across sectors but also serves as a model for how climate science can inform policies to protect lives, property, and economic stability in flood-prone regions.

Invited Speaker in Climate Linked Economics: Severe Convective Storms: Insights from Industry Experts and the Role of Reinsurance

Stephen Bennett, The Demex Group

145pm - 215pm

The escalating impact of severe convective storms (SCS) on the insurance market has reached a critical juncture. These storms, characterized by intense thunderstorm winds, hail, and tornadoes, are becoming increasingly frequent and severe in some areas, driven by the accelerating effects of climate change. As a result, the insurance industry faces substantial financial losses that challenge its stability and resilience. This presentation examines the multifaceted impact of SCS on the insurance market and explores innovative solutions to mitigate these challenges.

Recent trends indicate a significant surge in economic losses driven by SCS. Factors such as climate change, economic growth, urbanization, and higher repair costs are contributing to the surge. Notably, 2023 saw global insured losses from SCS reach $70 billion, more than double the previous five-year average. Insights from experts like Dr. Marshall Shepherd and Dr. Victor Gensini will be featured, shedding light on the shifting patterns of tornado activity and the expected increase in tornado outbreaks. The presentation will also explore the escalating financial burden on insurers and homeowners, emphasizing the growing significance of secondary perils like SCS, which now surpass primary perils such as hurricanes in terms of financial impact.

We will provide insights from insurance industry experts and examine the critical role of reinsurance in addressing the challenges posed by severe convective storms. Through personal accounts and expert opinions, we will illustrate the real-world impact of these storms on individuals and communities. The financial distress faced by insurers, leading to higher premiums, reduced coverage, or complete withdrawal from high-risk markets, will be highlighted. The evolving landscape of the reinsurance industry will be discussed, where reinsurers play a crucial role in spreading risks for natural catastrophes. As climate change exacerbates volatility in the frequency and severity of weather events, reinsurers are becoming more conservative, leading to higher costs and reduced availability of coverage. This has a domino effect, impacting primary insurers and ultimately, policyholders. The presentation will underscore the need for innovative solutions to ensure the resilience of the insurance market. “It’s becoming an untenable situation,” said Sridhar Manyem, senior director of industry research at AM Best, a company that rates the financial strength of insurers.

This presentation aims to provide a survey of the escalating impact of severe convective storms on the insurance market, highlighting both the challenges and the innovative solutions needed to build resilience in the face of climate change. By examining recent trends, expert insights, and cutting-edge reinsurance products, we aim to foster a collaborative approach to enhancing the stability and sustainability of the insurance industry in an era of increasing climate volatility.

Severe Thunderstorm Views of Risk for the Insurance Industry

Kristie Kaminski, Guy Carpenter

215pm - 230pm

Severe convective storms (SCSs), producing tornadoes, hailstorms, and damaging winds, are a natural hazard posing an escalating threat to the insurance industry. As insured SCS loss in the United States continue to increase, realistic views of severe thunderstorm risk are more crucial than ever to assist insurers and reinsurers in effective risk management strategy including underwriting and claims management. Leveraging climatological data and results from academic research, Guy Carpenter’s Severe Thunderstorm Risk Magnitude Index (SToRMi) has proven valuable in measuring and assessing the SCS hazard. While holistic assessment is sufficient for many applications, the frequency and occurrence of severe thunderstorms varies across different seasons and are subject to complex interplay between local weather patterns and large-scale atmospheric phenomena. We utilize SToRMi to analyze SCS occurrence and intensity across different timeframes and global oscillation phases (such as the El Niño Southern Oscillation), including monthly, seasonal, yearly, and decadal views. Results reveal insights that can help insurers and reinsurers understand seasonal variations in risk, anticipate peak periods, and highlight the importance of dynamic risk assessment in the risk selection processes.

Identifying Tipping Points in Climate-Related Insurance Modeling

Eleanor A. Middlemans, PricewaterhouseCoopers LLP

230pm - 245pm

As global temperature increases surpass 1.5°C above pre-industrial levels, tipping points can become a growing concern for insurers. Insurers may need new techniques to identify tipping points that may result in significant insured losses. This presentation provides actuaries and other professionals working on climate-related risk modeling with a methodology to help identify climate tipping points, or regime shifts, in different climate scenarios that could represent a new steady state for the insurance industry.

We aim to provide methodology that can be leveraged by insurers and identify tipping points that could impact the insurance industry. While climate tipping points are usually understood to take place over geologic time scales and have worldwide impacts, we evaluate narrower physical regimes or systems for significant and rapid change and refer to them as “regime shifts”. We focus on two systems that are meaningful to insurers in North America and regime shifts that occur on near-term (business-relevant) time scales: wildfires in California and heat stress in the Pacific Northwest. We propose a set of analytical statistical methods to help detect regime shifts that may be relevant to the insurance industry using output from climate model projections under multiple scenarios. Our methods illustrate the complexity of identifying regime shifts with tangible impacts to the insurance industry in the near future but can still provide insurers guidance to help extract relevant climate signals. By incorporating these methods into existing risk management, underwriting, pricing and investment management processes, insurers can prepare and adapt to a changing climate.

This presentation first outlines the above concepts of tipping points and regime shifts. We then present a statistical methodology to help evaluate physical regime shifts which actuaries may apply to understand where systems have entered a new steady state. We follow this with a qualitative discussion of possible climate-related impacts to insurers in the event of regime shifts, and where insurers may need to reevaluate and adapt current business practices.

Need for “Climate-Coupled Catastrophe”^TM (C3^TM) Models – A Novel Modeling Approach for Climate Risk Analytics

Mahmoud Khater, CoreLogic, Inc

245pm - 300pm

The increasing frequency and severity of extreme weather events, driven by climate change, pose significant challenges for the insurance and reinsurance sectors. To account for the complex dynamics of a rapidly changing climate, CoreLogic introduced a novel modeling approach that coupled Climate and Catastrophe Models to quantify current and future natural hazard risk. The CoreLogic’s “Climate-Coupled Catastrophe Models”^TM (C3^TM Models), integrate current and future high resolution climate data to develop high definition stochastic event sets that represent the frequency and severity distributions of expected future climate scenarios. By coupling climate models with catastrophe modeling techniques, we aim to provide a more robust framework for understanding and predicting the impacts of all natural hazard events. Here we present our C3^TM modeling approach and findings for the North Atlantic Hurricane peril. Our approach involves refining existing CAT model to incorporate the latest downscaled climate data. For this, we first downscale CMIP6 General Circulation Models’ data using different downscaling techniques (incl. dynamical, and hybrid downscaling). Later, from this downscaled data, we built hurricane stochastic event sets for different Shared Socioeconomic Pathways (SSPs; defined in IPCC Sixth Assessment Report) and time horizons (2030, 2040, and 2050). Finally, these future hurricane wind hazard data were combined with future vulnerability and financial modules to estimate average annual losses (AALs), probable-maximum losses and tail-value-at-risk at structure-level for all the structures in the U.S.

We found that, for coastal U.S. (Gulf of Mexico and East Coast), under SSP5-8.5, in 2050, the hurricane wind and storm surge related average annual losses would increase by 51% and 138% respectively. Here we further discuss the challenges of integrating climate science into catastrophe models.,. Overall, our findings highlight the spatial heterogeneity in future hurricane hazard and thus associated losses. This further underscore the importance of developing “climate-coupled models” ^TM as a transformative tool in the future of risk management, providing a more comprehensive and dynamic approach to assessing and mitigating climate-driven risks.

Panel Discussion on Climate Linked Economics: Economic Weather Risk Transfer: What Is It, and How Does It Enhance Institutional Resilience?

Moderated by, Matt Coleman, The Demex Group

430pm - 600pm

For thousands of years, people, communities, and institutions have worried about unpredictable events and the economic losses that they could cause. As a result, the notion of sharing and spreading unpredictable losses was born. Risk transfer is defined by the Reinsurance Association of America as the act of using a contractual agreement to shift an economic risk from one person or institution to another.=

Today, we see many examples of risk transfer. People pay insurance premiums to protect against potential future large loss events affecting their health or property. Banks purchase financial products to protect against fluctuations in foreign currency and interest rates when conducting global business. And increasingly, energy utilities, farmers, insurance companies, municipalities, and other weather-exposed institutions purchase financial protection against bad weather.

In this session, we will interact with industry practitioners who research, create, buy, and sell economic protection against weather risk. We will discuss questions and perspectives such as:

Which sectors of the global economy are most exposed to weather risk and climate change?

Why do institutions purchase financial protection against bad weather?

Why do other institutions have an ‘appetite’ to sell financial protection against bad weather?

How are data and analysis techniques used to identify and value weather risk and create financial protection?

What are some real-world case studies and examples of financial weather protection working well or poorly?

Panelists Include:

• Kristie Kaminski, Peril Advisory Analyst at Guy Carpenter

• Mark Russo, Chief Science Officer at Everstream Analytics

Wednesday, January 15, 2025

Weather, Water, and Climate Applications for Commodities Markets and Supply Chain Operations

Panel Discussion on Climate Linked Economics: Navigating Climate Risks in the Global Supply Chain

830am - 1000am

Moderated by Jon Davis, Everstream Analytics

Extreme weather and climate patterns have a profound impact on the global supply chain. This is evident both in the U.S. and on an international scale. Increasing disruptions at ports, cargo airports, intermodal hubs, shipping routes, and road/rail lanes have been observed over the past decades. These disruptions carry global consequences, leading to financial losses for businesses and delays in product delivery to consumers. The forthcoming panel will discuss the implications of weather and climate on the supply chain, examine how companies are mitigating risks, investigate the technologies in use, and contemplate prospective changes.

Panelists include:

• Adam Turchioe, Former Chief Meteorologist at Cargill, Meteorologist at Hartree Partners

• Jeff Massey, Weather Team Lead at Amazon

• Stephen Bennett, Chief Scientist at the Demex Group

Navigating Risks: ENSO, Climate Trends, and Their Impact on the Panama Canal

Mark S. Russo, Everstream Analytics

1045am - 1100am

The Panama Canal, a critical global trade route, is increasingly susceptible to dual threats of the El Niño Southern Oscillation (ENSO) and climate change. This study investigates the compounded impacts of ENSO events and recent decadal trends on Lake Gatun—the lifeblood of the Panama Canal's operations. Through a comprehensive analysis using historical precipitation data, ENSO indices, and Lake Gatun water levels, results indicate a significant relationship between ENSO phases and fluctuations in water levels alongside recent trends in water levels. This research highlights the critical importance of leveraging historical meteorological and hydrological data to mitigate the risks posed by seasonal variations and climate change to this crucial artery of global commerce.

Improving Renewable Energy Decision Support with Subseasonal-to-Seasonal Forecasts

Karl Critz, Salient Predictions

1100am - 1115am

Weather derivatives such as the Enwex wind and solar indices enable renewable energy producers and consumers to hedge volumetric risks transparently and efficiently. Much like the CME's established Heating and Cooling Degree Day products, these emerging financial instruments can be traded in private or open exchanges. Salient Predictions' 52-week AI-based probabilistic weather forecast provides differentiated insights beyond traditional 14-day numeric weather forecasts. This study builds and backtests an automated decision engine based on Salient's forecasts, quantifying the link between forecast skill and business value for traders, consumers, and operators.

Spire’s High-Resolution and AI Sub-Seasonal Weather Models: Essential Tools for Managing Volatile Wind and Solar Energy Markets

Tom Gowan, Spire Global

1115am - 1130am

As renewable energy sources become more prevalent, the volatility of wind and solar energy production increasingly challenges energy markets. Accurate weather forecasting is now crucial for optimizing trading strategies and managing financial risk. Spire Global addresses these challenges with its high-resolution and AI-driven weather models, both of which achieve world-class accuracy tailored to the demands of energy markets.

Spire’s 3-km high-resolution weather model, operational across the contiguous United States (CONUS) and Europe, assimilates proprietary space-based data—including radio occultation, soil moisture, and ocean winds—alongside publicly available datasets. A key innovation is Spire’s proprietary cloud analysis and ingestion system, which integrates radar and satellite data to provide precise forecasts of storm systems and cloud formations. This capability is vital for short-term energy market predictions, where even minor weather deviations can lead to significant financial impacts.

Complementing this, Spire’s AI-driven sub-seasonal ensemble model achieves world-class accuracy on forecasts out to 45 days. The model is trained on 40 years of data, including proprietary Spire data. It is then fine-tuned on several years of Spire’s Data Assimilation (DA) analyses. The model generates over 250 ensemble members allowing for the full distribution of possible future weather patterns to be forecasted. Ultimately, this enables the model to generate highly accurate weather regime and power forecasts, providing critical long-range insights for energy traders facing the increasing volatility of energy markets.

Through these advanced forecasting tools, Spire empowers energy traders to better anticipate market fluctuations, optimize trading decisions, and manage the risks associated with the transition to renewable energy sources.

Overview of 2024 Tropical Cyclone Impacts on United States Agriculture

Logan R. Bundy, Northern Illinois University

1130am - 1145am

During the 8–11 July 2024 period, Category 1 Hurricane Beryl tracked into eastern Texas before weakening and tracking through the Midwest. Unequivocally, tropical cyclones are impactful in both beneficial and detrimental ways for U.S. agriculture, as the impacts depend on the status of the crop, the time of year, and the severity of the tropical cyclone. Recent literature investigated the impacts of tropical cyclones on agriculture by examining the weekly deltas in USDA crop condition ratings across the southern U.S. The impacts on crops along Hurricane Beryl’s path will be investigated by replicating prior methodology, using state and county-level USDA crop conditions, and yield data to quantify changes in conditions and yield prospects. Quantifying these impacts provides critical information for risk management among farmers, policymakers, and those in agribusiness to make decisions during the boreal summer growing season and on longer-term resilience against extreme weather perils.

Potential Impacts of Wind-Related Perils on Air Freight: Assessing Vulnerability and Mitigating Risks for the Global Supply Chain

Francesco Preti, PwC

1145am - Noon

Airports play a pivotal role in the global supply chain, particularly for high-value, time-sensitive, and perishable goods. Air cargo is responsible for transporting goods worth trillions of dollars annually, making up a significant portion of global trade by value. With the increasing frequency and intensity of wind-related perils, including tropical cyclones, tornadoes, and wind gusts, understanding the vulnerability of major airports and potential disruptions to air freight is paramount. Our investigation focuses on the exposure of over 70 key global airports to these wind-related impacts from 2020 to 2050 under both a high and low emissions scenario and analyzes the possible downstream effects on the global supply chain. Our findings, derived from models developed by PwC, reveal significant geographical disparities in risk exposure. Airports in the United States, Central America, and many locations in Asia are currently subjected to and projected to face high risk from tropical cyclones. Airports in North America, Northern Europe, and some locations in Asia will likely see an increase in wind gust risk. Additionally, tornadoes are projected to impact more key airports in the United States by 2050. Wind-related perils can lead to severe operational disruptions, including flight delays and cancellations, damage to aircraft and ground equipment, and increased logistical complexity due to rerouting of flights. These disruptions can affect the timely delivery of goods and pose safety risks to passengers and airport staff. To address vulnerabilities that can affect airports and air freight, our study proposes several strategic recommendations. Reinforcing airport structures to withstand high wind speeds and implementing wind-resistant designs can mitigate the risk of damage and operational disruptions. Integrating real-time weather forecasting and early warning systems into airport operations can enable proactive measures to safeguard assets and confirm passenger and cargo safety. Strengthening coordination between meteorological agencies, airport authorities, and logistics providers can enable timely dissemination of critical information and coordinated responses to wind-related events. To help strengthen the global supply chain's resilience against wind-related disruptions, developing contingency plans that include alternative routing and utilizing secondary airports is essential. Companies can employ diversified logistical strategies to reroute shipments through unaffected airports, helping to reduce delays. Public-private business relationships can drive investments in resilience infrastructure and technology, which can lead to more holistic and sustainable solutions. By implementing these targeted strategies, stakeholders can safeguard the global supply chain, support sustainable economic growth, and enable resilience in the face of escalating wind-related risks. Our investigation provides a compelling call to action for policymakers, industry leaders, and the international community to prioritize resilience and sustainability.

Special Topics in Climate-Linked Economics

The Economic Benefits of Drought Plans

Harvey Spencer Hill, University of Saskatchewan

145pm - 200pm

The Economic Benefits of Community Drought Plans

There is limited literature available regarding the economic benefits of drought. One reason for this is that it is difficult to measure the economic impacts of droughts on a community's residents, businesses, and industries and how those effects differ when a drought plan is implemented.

This study estimated the cost of reduced water supply in a community due to water shortages caused by drought and drought plan-imposed water supply restrictions using economic methods from the resilience factor and welfare economics literature.

The resilience factor approach allowed quantification of the community's industries and public entities' capacities to function in the face of water disruption. Residents' welfare losses were quantified regarding the impact of water supply disruptions with and without a drought plan. In addition, the approach estimated the changes in revenue for the City's water utility due to drought and drought-plan-related reductions in water sales.

The economic model we developed estimated the impact of drought restrictions applied to Cedar Rapids, Iowa, using it drought plan, its 2017 water utility prices, and the 2012 combined monthly water demands of its residents, industry, and public sector. For the period studied, the City's water supply came from an aquifer fed by the Cedar River. The potential economic impact of the drought plan was estimated by applying the model to droughts based on low river flow for the streamflow record between 1904 to 2014 (111 years).

The results showed businesses and industries experienced fewer economic losses than would have occurred if there had been no drought plan. Cedar Rapids' residents' welfare losses also declined under the restrictions of the drought plan compared to when there was no plan. The Cedar Rapids' water utility also reduced its revenue losses by participating in the drought plan.

The study's findings are significant, as they provide valuable insights into the economic benefits of drought plans. This economic model of drought plans provides insights into how to enhance community drought resilience planning. The use of resilience factors provides insights into how businesses and industries can better be integrated into holistic community drought planning.

It opens up avenues for further research and exploration in the field of community drought planning. The model can facilitate an increased understanding of the implications of alternative drought plans, water restriction thresholds, and the limits of such plans by location, water demand composition, and water source. For the atmospheric and hydrologic research communities, it provides a method to link place-based physical science research to applied policy and decision-making.

Is Global Mean Surface Temperature the Best Index of Global Warming?

R. Saravanan, Texas A&M University

200pm - 215pm

Global mean surface temperature (GMST) has become the de facto index of anthropogenic global warming. Statistical relationships with GMST are commonly used to assess the economic risk of climate change. A virtue of GMST is that it is easy to describe and compute. But is GMST necessarily the optimal index to characterize global warming? We know that phenomena unrelated to anthropogenic global warming, such as El Niño, also affect GMST. Smoothing the GMST time series using a running average can filter out the impact of short-term natural variability, but it will reduce the degrees of freedom available for determining statistical relationships and also introduce edge effects preventing extrapolation into the future.

In this presentation, we explore the use of alternative indices to characterize global warming using signal-to-noise maximizing patterns and low-frequency component analysis. A potential issue with more optimal indices is their robustness, e.g., their structure could be sensitive to the “fitting period” used to define them. Preliminary results suggest that an optimal index can capture the more monotonic signal of global warming even beyond its fitting period, by weakening the confounding influence of El Niño events. This could help in more clearly identifying changes in the global warming trend.

Reporting, Regulation, and Government Intervention

Keynote Speaker in Climate Linked Economics: Business Resilience at the Intersection of ‘Values’ and ‘Value’

Steve Bochanski, PricewaterouseCoopers, LLP

215pm - 300pm

As climate change continues to pose unprecedented risks to communities, ecosystems, and economies, the meaning of “climate resilience” is evolving. The growing recognition that climate risk is business risk – with far reaching (financial and nonfinancial) implications that are already being felt today – is motivating business leaders across the ideological spectrum to act, with the potential to further unlock capitalism as a tool for climate progress.

To effectively address these multifaceted challenges, businesses are increasingly forming cross-disciplinary teams that bring together a diverse array of skills and expertise including climate science, financial modeling, and domain knowledge from across the entire value chain. By leveraging this collective knowledge, companies are developing robust strategies that not only ensure compliance with evolving regulations and enhance their adaptive capacity, but also have positive outcomes for society.

This keynote addresses the intersection of ‘values’ and ‘value’, exploring how climate mitigation is not just a matter of corporate social responsibility or altruism, but a vital business imperative that directly influences strategic planning and business sustainability both today and in the future. We will delve into the necessity for companies proactively participate in the energy transition while adapting their businesses for the reality of a more volatile future, examining how this approach not only mitigates potential threats but also uncovers new opportunities for growth and innovation. This presentation will highlight exemplary case studies and best practices, offering actionable insights into how businesses can successfully navigate the intersection of climate change and strategic planning to build a resilient future.

Roundtable Discussion on Climate Reporting, Regulation, and Government Intervention

Hosted by Michael Cameron Rencurrel, PricewaterhouseCoopers, LLP

430pm - 600pm

Climate risk reporting has become increasingly critical for businesses and investors as the impacts of climate change become more evident and costly. Governments worldwide are attaching legal ramifications to reporting requirements, making it imperative for organizations to stay updated with the latest developments. This roundtable discussion aims to explore the latest government regulations that require or encourage companies to disclose to climate-related risks and opportunities and the challenges and benefits to navigating this new framework.

The session will focus on the impacts of key regulatory frameworks, including potential new SEC rule, the European Corporate Sustainability Reporting Directive (CSRD) reporting rule, and emerging requirements from other regions. It will bring together viewpoints from the financial, insurance, and climate risk consulting spaces. By bringing together experts, practitioners, and stakeholders, this session aims to foster knowledge-sharing and facilitate a comprehensive understanding of the regulatory landscape surrounding climate risk reporting.

The insights gained from this roundtable discussion will enable participants to navigate the complex reporting landscape while effectively communicating climate-related risks and opportunities. It will also serve as an introduction for many in the audience to the field of climate risk management in general, providing an opportunity for students and early career professionals to learn about this growing field.

Preliminary roundtable participants include: include Steve Bochanski – Lead Climate Risk Partner at PwC, Alison Heslin – Executive Director, Climate Risk at JPMorgan Chase, and Joshua Hacker, co-founder and chief science officer of Jupiter Intelligence

• Steve Bochanski – Lead Climate Risk Partner at PwC,

• Alison Heslin – Executive Director, Climate Risk at JPMorgan Chase,

• Joshua Hacker, co-founder and chief science officer of Jupiter Intelligence.

Thursday, January 16, 2025

Weather, Water, and Climate Applications for financial Decision-making

Invited Speaker in Climate Linked Economics: Realized Benefits of Balancing Competing Purposes at US Army Corps of Engineers Reservoirs by Using Forecast Informed Reservoir Operations

Cary Talbot, U.S. Army Engineer Research and Development Center

830am - 900am

A recent policy change within the US Army Corps of Engineers (USACE) allows forecasted conditions to be officially used in planning future water management operations. Since 2014, the USACE has been a key partner in a multi-agency, multi-disciplinary research and development effort called Forecast Informed Reservoir Operations (FIRO) that has been exploring implementation of this policy change by researching how improved forecast skill, hydrologic modeling and observations can inform water management decisions at a series of pilot study locations. FIRO viability assessments are conducted through the use of a Research And Operations Partnership (RAOP) that brings together scientists, engineers, reservoir operators, regulators and stakeholders to assess the potential. Viability assessments conducted at these pilot reservoirs have demonstrated, through a series of approved deviations from current water control procedures, the potential for FIRO to significantly improve water availability, flood risk management and ecosystem benefits all without costly infrastructure modifications.

This presentation will discuss the benefits that have been realized at pilot sites so far through the use of approved deviations to test FIRO scenarios. These benefits have proven to have real-world economic value in improved water availability in both wet and dry years, improved flood risk management benefits and improved ecological outcomes for salmonids and other species as greater flexibility in water management operations allows for better timing of releases for spawning cycles and temperature control. Application of FIRO at sites where it is proven viable also provides greater flexibility for water managers to adapt to the challenges of climate change with weather extremes of drought and flood occurring with increasing frequency, all without the need for expensive and lengthy structural changes. The presentation will also include discussion of USACE efforts to assess FIRO suitability at the nationwide portfolio of USACE reservoirs.

Assessing and Managing the Financial Risk of Variable Hydrology in California

Gregory Characklis, University of North Carolina at Chapel Hill

900am - 915am

Multi-year droughts in California create financial challenges for large urban populations and irrigation-dependent agriculture that can be both significant and highly uncertain. Climate change projections suggest that these periods will become more difficult to manage in the future, and a growing concern for the ecological benefits of in-stream and other environmental water uses shifts a larger portion of the resulting losses to municipalities and irrigators. These issues have recently received increasing notice from lenders, investors and credit ratings agencies, driving increased interest in evaluating and managing the related financial risk. Both hydrologic variability and complex water infrastructure make the assessment of financial risk, and developing effective strategies for managing it, particularly difficult. This is particularly true for irrigators in the Central Valley, as favorable conditions for growing lucrative cash crops like nuts, citrus, and grapes make it the most economically productive agricultural region in the United States. Several large-scale water projects in the state supplement valuable irrigation supplies in arid parts of the Central Valley, like the Tulare Basin. This imported water allows producers to expand their planting of perennial crops, but year-to-year variability within the biggest supply projects creates significant financial risks for irrigators. The up-front costs of planting a perennial orchard can be an order of magnitude larger than those for annual crops, and even a temporary irrigation failure can kill trees, the replacement costs for which are not commonly covered with federal crop insurance. How do producers in this volatile region manage the financial risks caused by drought? Using the novel California Food-Energy-Water System (CALFEWS) model, we simulate existing risk management strategies used by orchard growers in the Tulare Basin region and analyze how they could be impacted in the future by climatic and/or regulatory stressors. We also propose several more sophisticated financial risk management strategies that involve groundwater banking and a new form of index insurance that can more cost-effectively reduce the risk. While this approach is investigated within the Central Valley, similar strategies could be employed in semi-arid regions throughout the Western U.S. and the world.

Managing Water Price Volatility: Hedging Strategies for Water Markets in the Western U.S.

Dan Li, University of North Carolina at Chapel Hill

915am - 930am

Over the past 30 years, water rights transactions have become increasingly common, driven by increasing scarcity, economic growth and the need to sustain instream flows. Water rights markets are anticipated to play a vital role in managing the impacts of hydrologic variability on increasingly stressed water supplies, challenges that will be further intensified by climate change. The State Water Project (SWP), primarily used for urban water supply, delivers surface water imported from Northern California to the Central Valley and Southern California. With the capacity to export up to 4.1 million acre-feet of water annually, the SWP provides these regions with up to 25% of their total water supply. However, the availability of water for export is subject to considerable variability due to fluctuating hydrologic conditions and stringent environmental regulations, and in a growing number of years, exports are substantially reduced, leading to considerable volatility in water market prices. This price uncertainty has become a source of financial risk to water districts, farmers, irrigation districts, groundwater storage banks and other water-dependent groups, leading lenders, investors and credit ratings agencies to pressure these groups into developing more effective financial risk management strategies. This study utilizes a simulation model that integrates export forecasts, regulatory constraints, and groundwater banking to estimate water transaction prices in California. The model's predictions are validated against data from various statewide and regional water markets. A scenario analysis focused on the financial impact of water price volatility on municipalities further demonstrates the model's effectiveness in managing urban financial risk. Moreover, the forward-looking predictions of the Nasdaq Veles California Water Prices Index (NQH2O) underscore its utility in managing financial risks within California's water markets, while also providing valuable insights for the development of water price indices in other regions.

A Composite Index-Based Instrument for Managing the Financial Risk of Variable Hydrometeorology for Electric Utilities

Yash Amonkar, University of North Carolina at Chapel Hill

930am - 945am

Electric utilities are particularly vulnerable to deviations from expected hydrometeorological conditions, including drought and heatwaves, which can influence peak electricity supply and demand, respectively. Utilities have long managed the financial impacts associated with these risks by using weather derivatives and index-based insurance products linked to temperature and hydrology. However, such tools often fail to account for the correlation between adverse conditions, thereby underestimating the risk posed by joint occurrence of droughts and heatwaves. For example, higher than normal temperatures can significantly and intermittently increase demand, forcing utilities to rely on more expensive energy sources. Meanwhile droughts can reduce available energy supply, particularly for sources such as hydropower, lowering electricity sales and utility revenues. When a heatwave coincides with drought, the risk of a severe budgetary shortfall rises, as increased demand must be met with reduced supply, often resulting in compensatory power purchases at exactly the time when prices are highest. Failure to address these financial risks can lead investors, lenders, and credit rating agencies to downgrade a utilities’ creditworthiness, resulting in increased borrowing costs (e.g., interest rates). This research utilizes a stochastic power system model (CAPOW) to explore economic dispatch, unit commitment, and hydrometeorological uncertainty, in order to characterize utility financial risks arising from weather variability. Pacific Gas and Electric (PG&E), a large California utility, serves as a case study where detailed weather, electric power system, and financial models are developed to simulate energy supply, demand, and net revenue variability under a variety of synthetic weather scenarios. Following the characterization of PG&E’s hydrometeorological financial risk, a novel financial contract is introduced to enhance its financial risk management. This contract is based on a composite index of measures including streamflow, temperature, and natural gas prices, and its cost-effectiveness is compared against a portfolio of three separate, and currently available, index insurance contracts, each based on a single index value. The composite index contract achieves the same reduction in the utility’s net revenue variance at roughly half the annual cost ($30 million versus $55 million). The savings is primarily attributed to the ability of the composite index to account for correlation between the three index values, which the portfolio of the three independent contracts does not, and which leads to lower basis risk. These findings have the potential to enhance the management of weather-related financial risks for electric utilities and contribute to the design of more effective insurance and reinsurance products.

Identifying and Defining Vulnerable Communities in Eastern North Carolina

Thyme Brown, National Weather Service

945am - 100am

Integrating social science into forecast operations is essential for the National Weather Service (NWS) to enhance community resilience and support its mission of protecting life, property, and the economy. The Newport/Morehead City, NC, Weather Forecast Office (WFO) is addressing this by leading an initiative to identify and define local weather-related and socioeconomic vulnerabilities. Now in its third year, the project aims to create a county-by-county atlas and maintain a database of vulnerable communities in eastern North Carolina to improve impact-based decision-making. Key elements in completing this atlas include community outreach through emergency preparedness events and forums, conducting interviews with Emergency Managers, and collaborating with Warning Coordination Meteorologists. By optimizing outreach and improving access to timely and actionable meteorological data in vulnerable communities, this project aligns with the NWS' mission of creating a Weather-Ready Nation.

Invited Speaker in Climate Linked Economics: Examining Financial Impacts to New York State Due to Impactful Weather

Nick P. Bassill, University at Albany

1045am - 1115am

New York State (NYS) is arguably the most weather diverse state in the entire country. While it may not be the first state one considers when they imagine hurricanes or blizzards or floods or severe thunderstorms, NYS is able to experience effectively any type of temperate region weather imaginable. In fact, it is the only state that can have a direct hurricane landfall as well as lake effect snow impacting its shorelines. This diversity of weather hazards places great strain of public and private sector entities which are impacted by weather.

Most public and private sector organizations lack an on-staff meteorologist, which presents a variety of challenges both within those organizations as well as when viewed holistically across organizations. Perhaps the most obvious challenge relates to proper interpretation of weather information. For example, if an electric utility lacks a meteorologist, are they able to properly calibrate the need to purchase outside assistance in advance of an upcoming storm? These types of decisions may be worth millions of dollars. NYS is fortunate to have a world-class weather observing system (the NYS Mesonet), which is likewise difficult to fully utilize for non-meteorologists. Much like private companies, government organizations frequently make potentially extremely expensive decisions. One example centers around responses to winter weather events: Do you pretreat roads? Should resources be moved across the state? Should critical roadways be closed due to the severity of the storm? These types of questions may be expensive in a political sense as well as financial.

To counter this traditional lack of institutional meteorological knowledge within organizations, many seek to fill this gap in one of several ways such as by hiring an outside private sector weather vendor and/or seeking stronger relationships with their local NWS office where possible. A growing number of organizations have also come to recognize the value in having dedicated meteorologists on staff or on call in some capacity. However, a patchwork approach across sectors can complicate preparation in other ways, which may increase financial impacts. Consider a hypothetical significant storm impacting New York City: while they may each have somewhat unique foci, the local electric utility, transportation authorities, emergency management office (etc) all have largely the same interests when it comes to understanding the weather. However, if they each use a different source of weather information – such as a combination of NWS, private weather vendors, and on-staff meteorologists – coming to collective agreement on what the forecast is may be difficult, which may hamper coordination if needed.

This presentation will examine some examples of the challenges discussed above and describe some of the ways NYS and the University at Albany is helping address these weather challenges in a cost-efficient way. UAlbany sports twin state-funded entities: (1) a Center of Excellence in Weather & Climate Analytics which primarily works with the state’s private sector, and (2) a newly created State Weather Risk Communication Center which serves the state’s public sector emergency management needs. The roles, aspirations, and impacts of both organizations will be discussed in this presentation.

Developing a Theoretical Foundation for Information for Climate-Risk Management: Assessing the Value of Information in a Stylized Example

Frances Moore, Columbia University

1115am - 1130am

Many actors and institutions — from insurers to local governments to utilities to individuals — are looking to integrate information about climate into their decision-making and risk management. However, the wide variety of adaptation decisions, across many locations, dependent on different weather variables and timescales, has made a generalized understanding of the kinds of climate information required to support adaptation decisions elusive. In this research we work towards such a generalized understanding, and a broad theoretical foundation to underpin the production and use of climate risk information into adaptation decisions.

We apply a “value of information” (VOI) approach to begin addressing this problem. VOI is appropriate for understanding climate change adaptation because it speaks to settings where an actor must make a decision under uncertainty and may have the option of acquiring new information. Actors use the information available to them to evaluate the set of available options and select the one that seems to perform best based on the actors’ criteria. New information (for instance information on the anthropogenic forcing effect from General Circulation Models ) allows the decision-maker to better optimize their decision and therefore has value, which can be formally quantified as the difference in the expected value of the decision with and without the new information. The VOI framework can flexibly be used to examine how different information about weather and climate risks provides value for the very different types of adaptation decisions that various actors across society face. These decisions can be characterized by a payoff function (combining vulnerability and exposure in a single function) that can be modified by the actor, based on their evaluation of relevant weather and climate risks using the information they have available.

In this talk we will present results from an idealized example. The climate system will be represented by the Lorenz (1963) model, with a slow time-dependent variation in one of the parameters to represent climate change. A variety of idealized loss functions will be considered, designed to represent decisions that might be relevant to agriculture, infrastructure, and insurance. Different types of uncertainties --- epistemic, aleatoric, etc. --- will be represented in this “perfect model” framework. We will consider the trade-offs between them, for example, considering the strengths and weaknesses of “models’ (copies of the Lorenz system with some uncertainty in the parameters, representing climate models with structural uncertainty, and possibly limited ensemble size) vs. synthetic “observed” time series (short samples of output from the actual system, which may or may not resolve either rare events or climate change trends) and describe how the VOI of different information states for adaptation differs across decision-settings.

Geospatial Climate Intelligence: Assessing Climate-Related Physical Risks and Enhancing Financial Resilience

Yang Yang, PricewaterhouseCoopers, LLP

1130am - 1145am

Climate change has brought increased financial risks for businesses and necessitated reporting obligations. Our Geospatial Climate Intelligence solution offers businesses the means to help to identify, measure, and manage climate-related risks. With a holistic understanding of potential hazards and their impacts, organizations can develop strong mitigation strategies, allocate resources effectively, and enhance their financial resilience in the face of climate change. Our solution can empower businesses to move from risk assessment to action, confirming a sustainable and secure future.

In this presentation, the main functions of Geospatial Climate Intelligence will be introduced with a focus on the damage and loss models for the six acute perils: tropical cyclones, floods, storm surges, hail, tornados, and wildfires. The damage and loss models integrate the hazard frequency and intensity, damage functions, and exposure information to help to quantify physical risks in monetary terms. The methodology, assumptions, inputs and outputs of the damage and loss models will be introduced to equip the audience with a good understanding of Geospatial Climate Intelligence capacities and how our solution can be utilized to make informed decisions based on the risk assessments.

Measuring the Climate Transition Physical Risk: Business Exposure and Validation Perspective

Alexander Andrianov, PricewaterhouseCoopers, LLP

1145am - Noon

There is an observable rise in the frequency and severity of weather hazards that is likely attributable to global climate transition. In some regions, these hazards pose a variety of significant risks to building, contents, inventories, and supply chain. We developed a suite of models that result in global maps of frequency and severity for 12+ hazards. These models are based on various global climate models outputs and observational data from governmental sources. The observed hazard record is related to observed weather parameters, and an environmental hazard index is developed over the historical period. Once a historical layer is created and validated, the same methodology is used with the CMIP6 output over future projections for various scenarios. Finally, these results are combined with specific business assets’ locations and characteristics to assess their potential exposure. It is imperative that climate transition science can help drive and determine effective risk evaluation to businesses seeking to plan and mitigate the future climate impact.

Most businesses just recently started to take climate considerations into account and include climate risk in their broader risk management frameworks. Along with this adoption, it quickly became apparent that developing and interpreting quantitative climate risk models present a number of challenges, including varying spatial data resolutions, limited historical observational data, alignment with models’ objectives and use, and regulatory compliance. To help address the challenges, PwC US has established a holistic four-steps model validation framework that can confirm scientific and conceptual integrity of the models, their readiness, and fit for purpose.

This framework includes the following stages: pre-development (climate data selection, gathering, and preliminary analyses), development (literature review, model implementation, and back-testing), post-development (present-day hazard benchmarking and climate impacts), and production (hazard layers’ spatial consistency and completeness). In addition to providing a holistic approach that can enhance the models’ reliability, our validation framework can promote the development of shareable validation procedures. This approach has already been applied at PwC US to more than 12 climate hazard models’ development.

Investing for Innovation and Entrepreneurship

Panel Discussion on Climate Linked Economics: Investing in Innovation for Weather/Climate-Driven Industries

Moderated by Manda Adams, National Science Foundation

145pm - 300pm

Securing funding is critical to turning groundbreaking ideas into actionable solutions in the rapidly evolving landscape of weather/climate-oriented innovation. This panel will explore the entire spectrum of innovation investments, from early-stage government support to late-stage private capital, showcasing the diverse funding pathways that propel new technologies from concept to commercialization.

Key Topics:

The Journey from Seed to Series A and Beyond: Hear directly from entrepreneurs who have founded weather-focused companies in the past five years. Panelists will share their stories, navigating the progression from SBIRs (Small Business Innovation Research) to seed funding, Series A rounds, and scaling their companies.

NOAA's Groundbreaking Partnership with the Reinsurance Industry: A recent Memorandum of Understanding (MOU) between NOAA and the Reinsurance Association of America marks a significant leap in leveraging climate data for resilience. This MOU, part of NOAA’s Industry Proving Grounds, strengthens NOAA’s collaboration with the insurance sector to enhance tactical and strategic decision-making around climate resilience, particularly for communities at risk from extreme weather.

NSF-NOAA Partnership for Catastrophic Impact Modeling Centers: In May 2023, a strategic agreement between NSF and NOAA created an Industry-University Cooperative Research Center (IUCRC) focused on catastrophic climate impacts and risk assessment. This center will combine academic and industry expertise to tackle some of the most pressing challenges related to climate-induced perils, providing critical insights and tools for the insurance sector.

Center for Interdisciplinary Research on Convective Storms: Convective storms, a significant threat to property and public safety, demand comprehensive research and innovative solutions. This proposed center, featuring leaders like Dr. Victor Gensini and Dr. Daniel Wright, will integrate meteorology, climate science, and socioeconomics expertise to advance understanding and develop cutting-edge methodologies for assessing and mitigating storm-related risks. The center aims to foster collaboration between academia, government, and industry to bolster societal resilience.

The Institute for Risk Management and Insurance Innovation (IRMII) at the University of North Carolina at Chapel Hill is a multidisciplinary research and innovation hub, bringing together academic researchers and industry professionals to develop creative solutions for managing the financial risks arising from a growing number of threats, ranging from extreme weather to pandemics to cybersecurity. In addition to creating new knowledge, IRMII is a platform for faculty from across the campus to provide graduate and undergraduate students with multidisciplinary training that prepares them for productive careers in the vitally important and evolving industries of risk management and insurance.

Moderator: Manda Adams, Climate Incubator, Division of Research, Innovation, Synergies and Education (RISE) at the National Science Foundation

Panelists:

• Victor A. Gensini, PhD, CCM (Northern Illinois University): Discussing the proposed Center for Interdisciplinary Research on Convective Storms.

• Greg Characklis, PhD, University of North Carolina at Chapel Hill: Discussing the UNC Institute for Risk Management and Insurance Innovation.

• Matt Stein / CEO and Co-Founder, Salient Predictions.

• Stephen Bennett / Chief Scientist and Co-Founder, Demex.

This panel offers a unique opportunity to explore how public-private partnerships, interdisciplinary research, and innovative funding models are transforming the field of weather risk management and driving resilience for communities and industries alike.