Climate risk focus for new Cedent-Nephilia joint venture
Cedent has announced the formation of Resilience Economics, a corporate finance advisory firm based in Bermuda that is focused on climate risk, with an initial $500 million of capacity from its strategic partner, Nephila Capital, for new and innovative climate risk solutions.
According to the company the joint-venture plans to use advanced data science to structure climate risk capital solutions for prominent institutions and governments around the world.
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. Solutions span climate insurance, climate derivatives, climate risk financing swaps, contingent credit facilities, and credit guarantees and serve purposes of enterprise risk management, capital strengthening, credit enhancement, managing cashflow volatility, liquidity requirements, and strengthening corporate governance.
According to Resilience the National Centre of Atmospheric Research estimates that the US economy alone can vary up or down by $240 billion annually due to day-to-day (non-catastrophic) weather fluctuations yet Resilience Economics estimates todays 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 and we are eager to support Resilience Economics and its clients in developing protection that responds to their specific exposures,” says Barney Schauble, Managing Partner at Nephila.
Resilience Economics will combine Nephila’s leading track record in weather risk with Cedent’s insurance and technology expertise. Michael Coles of Cedent commented: “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.”
