What can banking learn from an industry that has been assessing physical risk for decades? That question drives the work of Cathy Ansell, head of physical climate risk modeling and analytics at JPMorgan, who recently spoke with Linda-Eling Lee, the MSCI Institute’s founding director.

Ansell came to banking after working across the insurance sector – for a broker, a reinsurer and a catastrophe model developer – and at the World Bank, structuring disaster risk finance for developing countries. Since joining JPMorgan in 2021, she has championed a point the wider financial sector had not fully appreciated. “Climate risk isn’t new in itself,” she says. “It may be new to banks in terms of the transmission channels.”

Her team has put that idea into practice. “We did a lot of work of ultimately translating climate risk to credit risk,” she says, taking catastrophe model outputs traditionally used to price insurance and linking them to the bank’s credit loss models using probabilistic simulation. It is a way of translating decades of insurance expertise into a language banking already understands.

But Ansell also sees room for insurance models themselves to evolve. Measures taken by individual homeowners may already be reflected in assessments, while community-level resilience – from flood defenses to changes in water runoff – often is not. Incorporating those measures could allow insurance pricing to recognize communities that reduce their exposure. “It’s not that models aren’t able to do it,” she says. “It’s actually that insurers are not spending the time.”