Resilience Economics Formed To Focus on Climate Risk

Cedent Ltd. and Nephila Capital Ltd. have launched Resilience Economics Ltd., a corporate finance advisory firm focused on climate risk. The joint venture will use advanced data science to structure new and innovative climate risk capital solutions for prominent institutions and governments around the world. Resilience Economics will combine Nephila's leading track record in weather risk with Cedent's insurance and technology expertise.

The focus will be on expanding into sectors outside of energy that have climate exposure and need an advisory partner to help them quantify and manage that risk through a variety of solutions, include the following.

• Climate insurance
• Climate derivatives
• Climate risk financing swaps
• Contingent credit facilities
• Credit guarantees

The Resilience Economics website states that their "solutions are geared towards enterprise risk management, capital strengthening, managing cashflow volatility, enhancing credit, providing additional liquidity requirements, and strengthening corporate governance."

The National Center of Atmospheric Research estimates that the US economy alone can vary up or down by $240 billion annually due to day-to-day (noncatastrophic) weather fluctuations, yet Resilience Economics estimates that today's total risk transferred into the insurance industry stands at a mere $3 billion.

"We believe good advice around quantification and transfer of weather and climate risk is the critical key to unlocking the market potential," said Barney Schauble, managing partner at Nephila.

Michael Coles of Cedent said, "More than 1,000 CEOs and CFOs 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."