Travelers Insurance: Focusing on Climate Change and Natural Catastrophe Risk

Jul 25, 2013

Travelers Insurance: Focusing on Climate Change and Natural Catastrophe Risk (pdf abstract)

Purchase the full report on GlobaLens (Case study # 1-429-347)– published 07/2013, 28 pages.
Developed by:  Jonathan Huynh (’13), David Wang (’15), Jay Wolfgram (’15), and Connie Yu (’15) under the supervision of Andrew Hoffman

Description: Evan Blue is the fictional vice president of the Enterprise Risk Management and Business Conduct Group at Travelers Insurance. His challenge in this case is triggered by a report from Ceres called “Stormy Future for US Property and Casualty Insurers: The Growing Costs and Risks of Extreme Weather Events.” The report highlighted the need for insurance companies to evaluate climate change risk and develop multi-pronged response strategies. Business pressures included shareholder concern, increasing natural catastrophe losses, and pending regulation. Blue’s boss, Travelers CEO Jay Fishman, is looking for an answer from him by the next day. The case presents current scientific information on climate change and its impacts on the US. It takes a look at the state of Travelers’ business model and finances, as well as actions the company could take, providing students with the opportunity to translate scientific data and climate change modeling to a business case for risk mitigation.

Teaching Points:

    • Discuss climate change strictly as a business concern.
    • Expand the discussion of climate impacts to include adaptive measures to the usual conversation around mitigation.
    • Understand the insurance and reinsurance sectors and consider how the physical impacts related to climate figure into their business planning models.
    • Consider multiple ways of making the business case for addressing climate change within the insurance sector.
    • Consider the multiple (existing and emergent) products within the insurance sector and how climate change alters their structure and performance.
    • Discuss a company’s obligation to do the “right thing” with regard to climate change as well as whether the “right thing” is always clear for a company.