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RiskThinking.ai Appointed for Flood Risk Analysis in Canada

In a significant development for financial risk management in Canada, RiskThinking.ai, a leader in climate risk analytics, has been selected as the exclusive vendor to provide essential flood risk data as part of the 2024 Standardized Climate Scenario Exercise (SCSE). This initiative, orchestrated by the Office of the Superintendent of Financial Institutions (OSFI) and the Autorité des Marchés Financiers (AMF), aims to deepen the understanding of climate-related risks facing the financial sector, thereby enhancing risk measurement capabilities across institutions.

The SCSE's report titled "Strengthening Climate Risk Financial Resilience" sheds light on the importance of reliable and consistent data in managing climate risks, a challenge that many financial institutions have struggled with due to the lack of high-quality public information. By employing RiskThinking.ai's sophisticated analytics, the stress test has effectively accounted for the financial exposures related to flooding in eleven major urban regions, analyzing risks associated with approximately $904 billion in mortgage and real estate assets, alongside $3 trillion in insured property values.

Addressing Critical Data Gaps

The SCSE report has brought attention to pivotal issues that have hampered effective climate risk assessment. As noted by OSFI, there is a pronounced gap in the availability of accurate, forward-looking flood data. This absence of reliable information makes it difficult for financial institutions to adequately prepare for and mitigate risks.

Speaking on the partnership with OSFI and AMF, Dr. Ron Dembo, the Founder and CEO of RiskThinking.ai, expressed, "We are immensely proud to have collaborated with these regulatory bodies on this vital exercise. The SCSE initiative confirms a fundamental reality: that effectively managing systemic climate risk mandates a robust, predictive, and detailed data infrastructure. This collaboration not only enhances the capabilities of the Canadian financial sector but also sets a global benchmark for data-driven financial oversight."

Key Findings and Regulatory Implications

The SCSE report outlines several critical findings:

• - Limited Availability of Reliable Data: The scarcity of dependable public datasets highlights a significant challenge, with many institutions lacking the necessary expertise in geospatial analysis crucial for assessing climate risks effectively.
• - Underestimating Exposure Levels: A concerning statistic from the report reveals that only 40% of Canadian homeowners have opted for optional flood insurance, subsequently placing banks at greater risk due to unmonitored uninsured losses on collateral properties.
• - Evolving Regulatory Expectations: The findings have led to an expectation from OSFI and the AMF that institutions must proactively identify physical hazards within their portfolios, accurately estimate financial impacts tied to these risks, and pursue effective stress testing that utilizes hazard models and geospatial data. This is where RiskThinking.ai’s platform plays a crucial role.

About RiskThinking.ai

RiskThinking.ai specializes in financial risk analytics, offering comprehensive data and tools necessary for evaluating the impact of climate change on the financial sector. Their patented technology and Climate Digital Twin—which simulates over five million physical assets—transform complex climate science into actionable financial insights. By focusing on the uncertainties and tail risks associated with climate change, RiskThinking.ai equips financial institutions, corporations, and governments with the intelligence needed to foster a resilient future.

For more information on how RiskThinking.ai is addressing climate risks and enhancing financial resilience, visit their website: RiskThinking.ai. The full SCSE report can also be accessed through the OSFI's official site.