Underscoring the potential impacts of climate change across the insurance-linked securities (ILS) market, ILS specialists at global asset management group Schroders have suggested that ILS managers should recalibrate risk assessments to reflect the climate change that has already occurred, and not just long-term projections.
In a recent commentary, authored by Mark Gibson, Senior Investment Director ILS, and Dr. Benjamin Hohermuth, Senior Nat Cat Specialist, Non-Life, both at Schroders, the pair highlight the growing disconnect between traditional catastrophe models and today’s climate reality, arguing that ILS portfolios must be constructed with a forward-looking view that captures both near-term variability and longer-term structural shifts in weather patterns.
“As climate change continues to reshape the physical and financial world, investors in insurance-linked securities (ILS) are increasingly asking: how does a warming planet affect this asset class? The answer is nuanced. While climate change is undeniably altering the frequency and severity of certain natural catastrophes, its impact on ILS performance is more complex,” the analysts wrote.
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