At Euler ILS Partners Ltd, we recognize that shifting climate patterns are fundamentally altering the global risk landscape. Unlike many asset classes that may be passively exposed to these evolving risks, managing climate-driven changes is part of our business and these changes represent both a challenge and an opportunity.
We do not view climate trends as a reason to avoid risk, but rather as a call to ensure that risks are priced more accurately and exposure more intelligently. Our objective is to continuously adapt to the latest scientific insights and market observations to deliver resilient risk-adjusted returns to our investors with a disciplined focus.
Recent scientific findings and market observations highlight the following simplified key developments relevant for the ILS market:
Tropical cyclones
Storm intensity is projected to increase globally, even if overall storm frequency remains stable or declines slightly.
Secondary perils
The frequency and financial impact of secondary perils, including but not limited to wildfires, severe convective storms, flooding, have risen significantly, especially in the U.S., Europe, and Australia.
Precipitation and flood risk
Variability in rainfall patterns has led to more frequent flash floods and prolonged drought periods, often in regions previously considered lower risk.
Sea-level rise
Rising baseline sea levels amplify the impact of coastal storms and storm surges, increasing flood exposure even for more moderate events.
Climate impacts are highly localized, requiring granular analysis rather than generalized assumptions. We have developed a framework that emphasizes regional differentiation and a scientific, data-driven understanding of how exposures are evolving to address climate-related trends within our ILS strategies, built on five main pillars:
Scientific foundation:
We continuously monitor and integrate evolving climate trends, based on the latest independent research from globally recognized sources such as IPCC (Intergovernmental Panel on Climate Change) into our internal risk assumptions and risk frameworks, ensuring our view of risk reflects not just historical data but emerging realities.
Quantitative impact analysis:
Leveraging catastrophe models and proprietary analytical tools, we quantify the effect of climate trends on various insurance risk classes (relevant for ILS). We assess how shifting hazard patterns could impact expected losses, return periods, and risk correlations. This allows us to recalibrate risk assessments in line with evolving realities.
Peril and exposure differentiation:
Rather than applying one-size-fits-all assumptions, we differentiate by peril type, region and line of business, refining our underwriting and risk adjusted pricing decisions to reflect localized climate trends.
Dynamic portfolio management:
Our climate trend mitigation strategy is fully embedded into our underwriting, portfolio construction, and pricing decisions. We actively adjust peril selection, regional diversification, structure of instruments, attachment points, and terms and conditions to adapt portfolios dynamically to enhance portfolio resilience.
Continuous review and feedback loop:
Climate risk management is not static. We regularly review scientific updates, claims developments, model revisions, and market dynamics to refine our assumptions and maintain a resilient, agile and adaptive forward-looking portfolio.
At Euler ILS Partners, climate change is not an abstract threat or long-term risk, it is a present-day consideration in our investment and underwriting processes. Through science-based analysis, embracing quantitative rigor, and dynamic portfolio management, we aim to ensure that risks are properly priced, exposures are prudently managed, and portfolios remain resilient and adaptive in a changing risk environment.