In episode 41 of Climate Proofers, a podcast about climate adaptation and resilience finance, tech and policy, editor Louie Woodall sat down with Dr Oliver Wing, Chief Scientific Officer at Fathom, to discuss Fathom’s Global Flood Catastrophe (cat) model and the science that underpins it.
Here are some of the key takeaways:
It’s all about the data
Dr Wing emphasized the power of data in refining catastrophe models:
“The scope of this model is enormous. The fact that we can make these predictions at a 30-meter resolution – nothing like this exists elsewhere in the market.”
By capturing flood depth and probability relationships worldwide for various climate scenarios, a world first in the cat modeling space, the model offers a comprehensive tool for insurers, asset managers and financial institutions looking to understand their risk. Our expert science team can help run a portfolio scan to help you better understand your risk both today and in the future.
There are no secrets
There are plenty of companies that talk about their scientific bonafides and the coverage and granularity of their models. Dr Wing says the way that Fathom differentiates itself in this competitive market is through its transparency, publishing everything it does in peer-reviewed scientific journals:
“The secret sauce is that there is no secret sauce. We are ruthlessly and radically transparent about the methods, the data and the models that we build.”
“…everybody says they’re scientifically rigorous, but who can actually prove it? We’ve got the backlog of papers that describe everything that we do. We can demonstrate that the models have scale… and we can demonstrate that the projections of risk that we make using these tools match up with real experience over recent decades”
This touches on a key point often missed. A central aspect of Fathom’s work is not to make projections of tomorrow’s impacts before we can characterize and accurately model risks today. This can reassure users that the models they’re using have been accurate to date and can be used for decision-making.
Louie: “it gives you a little bit of a step up if you can say, we can actually model accurately what’s happening today.”
Building on existing catastrophe models
Rather than reinventing the wheel, Fathom enhances existing catastrophe models to better address climate-related challenges:
“There’s really no need to invent a new solution from the bottom up. All we have to do is enhance the catastrophe models that we already have to be a little more forward-looking.”
Bridging climate risk and financial markets
One of the key takeaways from the discussion was the need for credibility and cost-effectiveness in climate risk tools. Dr Wing noted:
“Our industry, particularly new players in the climate risk space, need to demonstrate credibility. We have to demonstrate that we have cost-effective tools that can allow you to make better decisions.”
Learn more about how Fathom’s award-winning flood and climate risk data support businesses in financial markets
It’s a communication challenge
He further highlighted the challenge of translating climate risk into tangible financial implications, with the link between price fluctuations and physical risk not fully understood:
“It can feel a little abstract in the financial sector – what a climate loss might look like. How do we connect the warming world, the extreme weather that is the result of it, the financial impact of that and how that links to specific use cases for banks, asset managers, investors and insurance-linked securities?”
Predicting the future of flood risk
Refining the use cases for climate risk information is crucial. Dr Wing stressed that models like Fathom’s should focus on providing actionable insights rather than attempting to answer every possible question:
“We need to see that there is a correlation in climate risk or flood risk and asset valuation.”
With the growing demand for reliable climate risk modeling, tools like Fathom’s Global Flood Cat model are paving the way for more informed decision-making in financial markets for investors looking at the risks and opportunities presented by a changing climate.
