A initiative unveiled at the United Nations Climate Summit in New York this week could encourage more issuance of catastrophe bonds.

A coalition of public and private sector organizations are examining ways to incorporate convened to examine how to embed climate and disaster risk stress testing within banking and securities regulation, investment and accounting practices.

The initiative is being led by the United Nations Office for Disaster Risk Reduction (UNISDR), the World Economic Forum and several partners, including Willis Group Holdings, PwC, The International Council for Science, Standard & Poor’s Ratings Services, Swiss Re, the United Nations Environmental Programme and senior financial regulators.

At the initiative’s core is the one-in-100 year solvency “stress test,” similar to that developed in recent decades by the insurance sector to assess its own ability to underwrite risks. The test evaluates the maximum probable annual financial loss that a company, city, or region, could expect once in a 100 years. Modeling this risk should enable them to manage it in a more informed and effective way.

“The aim is to help regulators, companies and investors to evaluate systematically the risk of storms, droughts, floods and other extreme weather events to the financial well-being of public and private sector organisations. A better understanding of climate risk and economic losses from disasters can become a normal feature of investment analysis and financial planning,” Mike Wilkins, managing director, Standard & Poor’s Rating Services, said in a statement published Wednesday. 

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