Today, Physical Risk is changing forever and the banking world's approach to physical risk is lagging insurance, so it is now undergoing a fundamental transformation:
- From a future consideration to an immediate driver of value (revalue existing exposure and reprice new exposures)
- From an unquantified threat to a tradable asset (using physical risk swaps)
- From a peripheral concern to a core determinant of banking stability (solving the mismatch of lending and insurance tenors)
As physical risks increase, from whichever root causes, not only do insurance premiums increase, but the real possibility of mass market withdrawal of insurance increases. Remember: banks lend long-term, but insurers underwrite short-term. In this presentation, we outline how the financial system can rapidly integrate an open source framework to accelerate, at scale and at lower cost, physical risk into the global banking system and solve the risk of managing regional exposures to any major hazard.
