Jeff Bohn, One Concern
As global population increases amidst rapid, continued urban development, lifeline networks (LN) (e.g., power, water, transportation, etc.) are becoming an important component of re/insurer’s catastrophic risk assessments. As climate change has increased the frequency or severity (and sometimes both) of natural disasters, a broader cross-section of financial firms is exploring how to incorporate resilience modeling into existing operational, physical, and credit risk models. Thus, more detailed catastrophic risk frameworks have become essential to assess and bolster the resilience (to low-frequency, high-severity natural disasters) of societies, properties, businesses, and governments. This growing material risk is not typically managed. In addition to these physical infrastructure LN, human-centered entities depend on eco-systems (e.g., clean air, clean water, productive soil, healthy oceans, healthy forests, etc.) These natural assets can be considered eco-systems services (ES). LN and ES together constitute material dependency risks. Generally, these networks and systems can be considered public goods and, in many cases, global public goods. As public goods, their value-generating capacity is typically non-rival and non-excludable making it harder to align incentives to invest and manage these resources—global public goods are particularly challenging. Herein lies a foundational challenge for managing natural assets.