Insights

OAK at London Climate Action Week 2025: from volatility to opportunity
OAK at London Climate Action Week 2025: from volatility to opportunity 1950 776 Oak Reinsurance

OAK at London Climate Action Week 2025: from volatility to opportunity

Raphaelle Vallet
Head of Sustainability

OAK climate leaders discuss key themes for the (re)insurance industry from London Climate Action Week.

London Climate Action Week (LCAW) is one of the world’s most dynamic gatherings of climate leaders, convening voices across finance, policy, and industry. For us at OAK, it was energising to be part of so many conversations at the intersection of climate, risk, resilience, and innovation.

This year, we joined events hosted by partners including Howden, Aon, Lloyd’s and the Geneva Association to help tackle some of the most urgent questions facing the (re)insurance industry. Reflecting from the week, we observed three standout themes.

From canaries in the coal mine to drivers of resilience

(Re)insurers can evolve their role from risk transfer to supporting the design of projects at the outset to maintain insurability over the long-term.

Our founder and CEO Cathal Carr spoke at Howden’s De-Risking Summit, which brought together influential voices from the real economy to the financial system. (Re)insurers often face the impacts of climate-driven risks before the rest of the financial system. Stranded asset risk can correlate with declining insurability; for example, where home owners cannot access or afford insurance, they may also feel repercussions on the affordability of mortgages and house prices.

“The climate continues to warm. That is causing multiple effects, including increased frequency and severity of extreme weather events. That increase in risk and volatility creates pressure on our ability as an industry to understand those risks and price them appropriately, then passing on that confidence to our investors that we can allocate capacity to help solve these challenges.”

Cathal Carr, Founder and CEO, OAK Re

At the same time, real economy firms at the Summit mentioned challenges in being recognised and incentivized by their insurers to invest in resilience, while the investment community still looks to increase the speed and scale of investments into infrastructure – the core asset class driving sustainable outcomes, from lower emissions to improved resilience.

“We’re looking to scale up our infrastructure financing around the world very substantially over the next several years… As we finance deals, we need to distribute those risks, [including] through insurance.”

Sir Danny Alexander, CEO of Infrastructure Finance and Sustainability at HSBC
(edited for brevity)

We were proud to contribute to Howden’s latest report The Insurability Imperative, which reframes the role of our industry in this direction.

Unlocking the bankability of emerging technologies

As new energy technologies progress towards commercialisation and scale, they will also need clear pathways to insurance.

Glenn O’Halloran, Transition Class Lead, participated in a session on insuring scalable growth in fusion energy hosted by Lloyd’s and President of Innovation Strategies, Tom Dickson, also spoke at a Geneva Association session on challenges and opportunities around insuring carbon capture, utilisation and storage (CCUS). As these advanced energy systems edge toward commercial viability, tailored risk frameworks and insurance capacity will become crucial to maintain support from investors and policy-makers.

Investing in talent

Across the sessions we joined, one theme kept surfacing: talent.

Climate-driven risks are becoming more complex: the frequency and severity of extreme weather events and disasters are increasing faster than model projections, while new technologies, infrastructure and software are reshaping the energy system into one that is more distributed, flexible, and technically sophisticated.

In a roundtable on insuring the energy transition hosted by Aon, Glenn O’Halloran and Hugo Buckmaster, International Property Catastrophe Class Lead, discussed the risk expertise challenges our industry faces as physical and transition risks continue to evolve. We are in a race to build expertise to address climate-driven risks – and, just as importantly, seize opportunities.

Turning insight into action at OAK

Our time at LCAW was a reminder of the possibilities when the right people, ideas, and tools come together.

At OAK, we believe climate represents a significant opportunity that will allow us to create sustainable value for investors. As part of our own journey to build deep climate expertise, we have brought together a multidisciplinary team spanning transition and climate underwriting, catastrophe research, sustainability, data science, and modelling.

With this multi-disciplinary team, we are working to tackle these industry challenges in improving resilience and insurability and unlocking capital for new technologies.

For example, we adjust standard CAT models to better reflect the present-day risk landscape — recognising that climate change is already shifting the severity and frequency of perils. We are helping create new pathways to insurability for high-potential, high-impact technologies — supporting product development and working with partners to bring new insurance solutions to market for assets like battery storage, CCUS, and solar PV.

As we are seeking to meet new insurance demands for physical and transition risks, we have developed a proprietary Climate Opportunity Framework, in partnership with Aon and Howden, which allows us to identify and rate the attributes of our transactions aligned with 6 critical areas: technological transformation, product innovation, protection against extreme weather & disasters, food security, public sector partnerships, and supporting developing economies.

We believe the (re)insurance industry has a unique opportunity to shape the climate agenda. As we continue to build our business, we look forward to driving real progress by building partnerships, innovating boldly, and leading with intent.

Keeping ahead of the trends: understanding risk in a changing climate
Keeping ahead of the trends: understanding risk in a changing climate 1950 776 Oak Reinsurance

Keeping ahead of the trends: understanding risk in a changing climate

Richard Dixon PhD
Head of Catastrophe Research

The climate is changing: that much we know. Those of us in the United Kingdom may have noticed that the frequency of snowfall in winter has dropped in the past thirty to forty years, or that we tend to get hot spells more frequently. But what are the challenges when we start to consider the less frequent events that reinsurers are interested in?

The chart below shows the frequency of heatwaves (defined here arbitrarily as 5 or more days above 27C) from Berkeley reanalysis data for a location at 51N, 0W: essentially somewhere close to London.

To the eye, we can see that whilst we’ve had heatwaves in the past (the 1976 heatwave is often referred to as a benchmark and 1911 is noted as well for the length of warm spell), we can see seemingly more and more heatwaves in the present day, especially after around 1990. We can summarise this alternatively by looking at the return period of heatwaves in the prior 50 years’ worth of data and see how frequent the heatwaves were in this data:

In simplest terms, we can see how the return period of heatwaves has dropped markedly from around 1-in-12 years in 1950 to about 1-in-6 by 2025. But what are the chances that we’re able to spot a shift in an event that changes from a 12-year event to a 6-year event from 1950 to 2025?

We can do a simple test here where we say that a heatwave in 1950 has a 1-in-12 chance of happening in that year that gradually becomes a 1-in-6 chance by 2025. Is a change in heatwaves easy to spot? What we’ve done is run our experiment 10,000 times – essentially re-running history 10,000 times – and looked to see if there is an increasing trend in heatwaves in keeping with the underlying shift from 12- to 6-year return periods:

We can see that around 75% of the time, we should be able to spot an increase in the frequency of heatwaves. So, when events that are fairly frequent start happening more frequently, it’s often evident to us or “spottable” in data owing to their frequency.

Now, if we switch to the world of insurance and reinsurance, we’re often wary of events on the “once-in-a-lifetime” timescale that occur. What if the frequency of these events is changing as well? Can we spot the shift much like we’re likely able to spot the shift in heatwaves?

Let’s assume that our once-in-a-lifetime event has the return period of 1-in-100 years: the sort of return period that’s typical of middle-to-upper layer reinsurance programmes. What if – like the heatwaves – this is becoming twice as frequent, and from it being a 100-year event in 1950, we’re seeing this maybe once every 50 years in 2025.

So, let’s do our same experiment again: this time with a 1-in-100 chance in 1950 becoming a 1-in-50 chance by 2025. Can we spot the shift in these longer return period events from 1950 to 2025?

Now we see a different result. Only around 40% of the time can we spot an upward shift in the risk. There is a doubling of the risk, but it’s at much longer return periods: both a 100-year and 50-year events are pretty rare and this is evidenced by the fact that there’s a 1-in-3 chance that you simply don’t see any events in our 1950-2025. So the risk essentially appears as though it is not changing. Indeed the rarity of this risk – even though it’s doubling – can also give the impression around a quarter of the time that the risk is decreasing!

It’s this that is potentially the most dangerous aspect of relying on historical data: when risk is changing, but the risk is rare across the period of interest, we may not have any signals it’s changing. As takers of risk, it’s becoming increasingly important to make sure we don’t take history at face value and to seek other ways that look beyond historical data to understand present-day risk.

The ability to adjust for shifts in both frequency and severity are paramount in building out a present-day view of risk that accounts for changes that might have happened: even if they are not in plain sight. Therefore, part of the build-out of OAK’s internal risk systems has been to ensure that shifts in both frequency and severity of perils are catered for at the point of underwriting.

Given that historical data alone can be an unreliable guide, it’s fortunate that more and more work is being done by researchers to effectively simulate history multiple times in climate models to help us understand how risk might be changing. The more we can invest in and partner with this pioneering research, the better informed we will become as an industry.

Richard Dixon

Richard has 25 years of experience in the insurance industry building, researching and evaluating catastrophe models. He has a specific interest in understanding whether and how climate change is reshaping catastrophe risk, challenging conventional assumptions and developing new approaches to risk assessment. He has been a Visiting Research Fellow at Department of Meteorology at the University of Reading for the past 7 years and is a Fellow of the Royal Meteorological Society.

Start Typing