Central Bank of Trinidad and Tobago publishes working paper on climate-conditioned catastrophe models for insurance sector physical risk

The Central Bank of Trinidad and Tobago has published a research working paper on how “climate-conditioned” catastrophe models can be used to quantify insurers’ exposure to acute physical climate risks such as flooding, tropical cyclones and extreme heat. The paper sets out why traditional catastrophe models grounded in historical data may understate future loss severity and examines how climate scenarios can be incorporated into modelling to support risk management, scenario analysis and stress testing. It maps key transmission channels to insurers’ balance sheets, including higher mortality and morbidity, property and infrastructure damage, business disruption, rising claims and reinsurance costs, and potential asset value impacts. The paper outlines core catastrophe modelling components and common output metrics, describes approaches for adapting models to future climate conditions, and reviews both proprietary and open-source tools and resources, including the Oasis Loss Modelling Framework, CLIMADA and the use of open-source databases by the Network for Greening the Financial System. It concludes that severe data limitations and capacity constraints hinder robust climate-conditioned modelling, and argues for stronger collaboration to close domestic data gaps. Suggested near-term actions include deepening engagement with relevant national authorities and public sector agencies to support consistent hazard projections and scenario design, engaging commercial model and data providers to bridge technical gaps, developing a more granular dataset on insurers’ location-specific exposures, and reissuing a qualitative survey to assess domestic insurers’ climate risk awareness and exposures.