Search Results
Report
Physical Climate Risk Factors and an Application to Measuring Insurers’ Climate Risk Exposure
We construct a novel physical risk factor using a portfolio of REITs, long on those with properties highly exposed to climate risk and short on those with less exposure. Combined with a transition risk factor, we assess U.S. insurers’ climate risk through operations and $13 trillion in asset holdings. Estimating dynamic climate betas, we find higher stock return sensitivity to the physical risk among insurers operating in riskier regions and to transition risk among those holding more brown assets. Using these betas, we calculate capital shortfalls under climate stress scenarios, offering ...
Speech
Climate Change and Risk Management in Bank Supervision
Remarks at Risks, Opportunities, and Investment in the Era of Climate Change, Harvard Business School, Boston, Massachusetts.
Working Paper
California Wildfires, Property Damage, and Mortgage Repayment
This paper examines wildfires’ impact on mortgage repayment using novel data that combines property-level damages and mortgage performance data. We find that 90-day delinquencies were 4 percentage points higher and prepayments were 16 percentage points higher for properties that were damaged by wildfires compared to properties 1 to 2 miles outside of the wildfire, which suggests higher risks to mortgage markets than found in previous studies. We find no significant changes in delinquency or prepayment for undamaged properties inside a wildfire boundary. Prepayments are not driven by ...
Speech
Testimony on Exploring Financial Risks on Banking Posed by Climate Change
Testimony before the New York State Senate Committees on Banks, Finance, and Environmental Conservation (delivered via videoconference).
Working Paper
Flood Underinsurance
Using data on expected flood damage and National Flood Insurance Program policies, we estimate annual flood risk protection gaps and underinsurance among single-family residences in the contiguous United States. Annually, 70 percent ($17.1 billion) of total flood losses would be uninsured. Underinsurance, defined as protection gaps among properties with positive flood risk and incentives to purchase full flood insurance coverage, totals $15.7 billion annually. Eighty percent of at-risk households are underinsured, and average underinsurance is $7,208 per year. Underinsurance persists both ...
Working Paper
Who Bears Climate-Related Physical Risk?
This paper combines data on current and future property-level physical risk from major climate-related perils (storms, floods, hurricanes, and wildfires) that owner-occupied single-family residences face with data on local economic characteristics to study the geographic and demographic distribution of such risks in the contiguous United States. Current expected damage from climate-related perils is approximately $19 billion per year. Severe convective storms and inland floods account for almost half of the expected damage. The central and southern parts of the U.S. are most exposed to ...
Discussion Paper
Physical Climate Risk and Insurers
As the frequency and severity of natural disasters increase with climate change, insurance—the main tool for households and businesses to hedge natural disaster risks—becomes increasingly important. Can the insurance sector withstand the stress of climate change? To answer this question, it is necessary to first understand insurers’ exposure to physical climate risk, that is, risks coming from physical manifestations of climate change, such as natural disasters. In this post, based on our recent staff report, we construct a novel factor to measure the aggregate physical climate risk in ...
Speech
Emerging Issues for Risk Managers
Introductory Remarks at the GARP Global Risk Forum, Federal Reserve Bank of New York, New York City.