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Climate change is challenging risk managers



SAN FRANCISCO – Climate change is at a critical juncture and risk managers have an important role to play in addressing this issue, said an expert during an innovation hub session at the Risk and Insurance Management Society Inc.’s Riskworld conference on Monday.

“There are too many times when risk managers are not in the room on this issue,” says John Merkowsky, Head of Risk & Analytics, Head of Strategy for Large Accounts, Risk & Broking, at Willis Towers Watson PLC.

Climate change is creating physical exposures and challenging the insurance industry’s ability to respond to the rapid pace of climate exposures, such as the increasing severity of extreme weather events, Merkowsky said.

Managing the transition to a low-carbon economy can also lead to companies facing a range of exposures, such as political, legal, reputation, technology and market risks, he said.

“We are better prepared to think about these risks in a different way than we have done in the past,”

; Merkowsky said.

Climate change also creates liability exposures and reputational risk exposures for companies due to increased litigation, while a changing regulatory environment reinforces climate-related exposures, he said.

There is a “rapid acceleration that goes together,” about the climate, he said.

Understanding the climate as an amplifier of all risks is important, Merkowsky said.

While insurance, such as environmental liability protection, exists for certain climate-related risks, climate change will also introduce new risks that risk professionals have not already thought about, he said.

There is an opportunity for risk professionals to become more involved in the discussion about climate change, he said. “Risk professionals should lead the discussion on physical risks, transition risks and liability risks,” Merkowsky said.


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