What has become clear is that insurers need to consider the impact on climate change across their whole business; and the market as a whole is dynamic. This means taking an integrated approach to climate risk assessment and we have produced a framework to help insurers do just that, together evolving climate risk data, models and software as needs emerge.
The Real-World Economic Scenario Generator (ESG) contains stochastic asset models and calibration content that support realistic projections of asset returns and risk-factor distributions. The ESG allows insurers, asset managers, and institutional advisers to undertake a wide range of risk management and asset liability modeling (ALM) activities.
The Market-Consistent Scenario Generator is a suite of stochastic asset modeling tools in a flexible framework that allows insurers to produce risk-neutral scenarios to value optionality in insurance liabilities, as required by regulatory and accounting regimes. Risk-neutral modeling is also used for hedging and risk management activities.
The Property & Casualty Scenario Generator contains stochastic asset models and calibration content for the evolution of various economic and financial market variables. The Property & Casualty Scenario Generator is a critical input into capital models, investment processes, and claims modeling. It allows insurers, asset managers and institutional advisors to undertake a wide range of risk management and asset-liability modeling (ALM) activities.
Severe climate events throughout 2020 underscore the importance and urgency for market participants to understand how climate change is already affecting—and will continue to affect—the risk and return of their portfolios.
To help insurers during the pandemic, Moody's Analytics provided stress testing scenarios on a deterministic and stochastic basis, enabling insurers to understand the possible recovery scenarios and impacts across global markets.
About Insurance Asset Risk
Insurance Asset Risk is a source of news and analysis of investment strategy and the asset side of insurers' balance sheets.