Cedent Ltd., a global insurance industry-focused investment management firm, has launched a corporate finance advisory entity with a focus on climate risk that’s backed with $500 million of capacity from Nephila Capital Ltd., the world’s largest insurance-linked securities (ILS) manager.
The new corporate finance advisory joint-venture, Resilience Economics Ltd., will use advanced data science to develop and structure climate risk capital solutions for global institutions and governments.
Resilience Economics Ltd. will focus on growing into segments outside of the energy space that have climate risks, and that need an advisory to assist with both the quantifying and management of risks.
According to an announcement on the launch, products include climate insurance, climate derivatives, climate risk financing swaps, contingent credit facilities, and credit guarantees, which aim to address enterprise risk management, capital strengthening, credit enhancement, the management of cashflow volatility, any liquidity demands, and the strengthening of corporate governance.
Reportedly, the National Center of Atmospheric Research estimates that the U.S. economy can vary up or down by as much as $240 billion each year, as a result of day-to-day (non-catastrophic) weather fluctuations. However, Resilience Economics claims that total risk transferred to the insurance sector amounts to just $3 billion, underlining the potential for growth in this sub-sector of the risk transfer industry.
Manager Partner at Nephila, the advisory’s strategic partner, commented; “We believe good advice around quantification and transfer of weather and climate risk is the critical key to unlocking the market potential and we are eager to support Resilience Economics and its clients in developing protection that responds to their specific exposures.”
Cedent’s Michael Coles, added; “More than 1,000 CEOs and CFO’s of public companies disclosed that adverse weather directly drove poor financial results on earnings calls with stakeholders so far this year. A few decades ago, businesses did not transfer the risk of fluctuations in currencies, interest rates, or commodity prices but eventually stakeholders deemed risk retention unacceptable once risk transfer markets developed. Climate risk retention may soon be deemed unacceptable and if so, climate capital solutions will be the new imperative.”
At the same time, Resilience Economics has welcomed Lynda Clemmons, a senior Executive Vice President (EVP), Sustainable Solutions, NRG Energy, to its international Advisory Board.
Clemmons, commented; “Fast-forward 20 years and the abundance and granularity of data capture means we have new possibilities for structuring innovative transactions. The value of these capital solutions is now available to every industry, not just the energy sector. I am excited to build Resilience Economics as the go-to advisor on climate risk financial matters.”
