In 2023 Fitch Ratings observed "Natural catastrophe business has become largely loss-making in recent years as prices have failed to keep pace with increasingly frequent, severe and volatile weather-related losses due to climate change."Let's look at what this means for an insurer named Markel. Their 2020 annual report contains the frank remark:"First, we’ve significantly reduced writing insurance and reinsurance with exposures to natural catastrophes... We’ve not earned adequate returns for the risk and capital charges associated with large property related exposures for several years. We will redeploy the capital previously allocated to this business to higher and better uses within Markel."Let's now look at how entrepreneurs are responding. Spatial Risk Systems (https://spatialrisksystems.com/) is a Manhattan spatial finance company. It is run by some of the finance industry’s most experienced professionals. An example is Alex Vengerovsky, the chief scientist in this episode. He has worked at Bridgewater for example. Ray Dalio, founder of Bridgewater, is one of the world’s most successful investors. SRS has developed a geographic information system for the finance industry that scores US counties, zip codes and census tracts on 4 risk dimensions. These are climate impact, environmental risk, community vulnerability and community resilience. These are also aggregated as an overall risk score. This system can then be used to rate the spatial risk of a given asset, such as by using the footprint of a building. Consider a publicly traded electricity company. The building footprints of their power plants will be available. They can be used to sample the risk scores at the building locations on these 4 dimensions provided by SRS. Through this, a clearer understanding for investors and insurers can be gained of the risks faced by each power plant in recovering from, for example, an adverse weather event. Depending on the risk score, the event impact may be increased or reduced. This may be considered from the perspective of "cost, toll, and duration of an event and affect the overall risk to a community or asset" (https://spatialrisksystems.com/spatial-risk-score-methodologies/). Considering the community vulnerability dimension, if the asset is in a location where this is high then there may be significant challenges in restoring original function after a disaster. The opposite is likely to be true where community vulnerability is low. Let us return to the Markel example at the beginning. Perhaps the geospatial analytics of Spatial Risk Systems can help Markel re-enter the natural catastrophe market through better capacity to gauge risk. For more detail, here are some really informative videos on YouTube about what SRS does: https://youtube.com/@spatialrisksystems8197?si=3OSBG5eWUAE3eyQi THE GEOSPATIAL INDEX The Geospatial Index is a comprehensive listing of all publicly traded geospatial businesses worldwide. Why? The industry is growing at ~10% annually. For only $58,000 to start, this growth rate is $5,000,000 over a working life. This channel, Bluesky account, newsletter, watchlist and podcast express the view that you are serious about geospatial if you take the view of an investor, venture capitalist or entrepreneur. You are expected to do your own research. This is not a replacement for that. This is not investment advice. Consider it entertainment. NOT THE OPINION OF MY EMPLOYER NOT YOUR FIDUCIARY NOT INVESTMENT ADVICE Bluesky: https://bsky.app/profile/geospatialindex.bsky.social LinkedIn: https://uk.linkedin.com/in/wilfred-waters-902b16217 Watchlist: https://www.tradingview.com/watchlists/123254792/ Newsletter: https://www.geospatial.money/ Podcast: https://open.spotify.com/show/5gpQUsaWxEBpYCnypEdHFC
