Insurance investment firm Cedent Ltd has teamed up with Nephila Capital to create a new Bermudian-based firm to advise corporations and countries on managing climate risk.

Resilience Economics Ltd will be backed by $500 million from Nephila, which is also based in Bermuda and is the world’s largest insurance-linked securities manager.

Resilience says it will use advanced data science to develop and structure climate risk capital solutions for global institutions and governments.

Michael Coles, the insurtech expert and chief executive officer of Cedent, said Resilience was not a risk-bearing entity, but that it would work with companies to help them understand the impact climate risk has on their financials.

“More than 1,000 CEOs and CFOs of public companies disclosed that adverse weather directly drove poor financial results on earnings calls with stakeholders so far this year,” Mr Coles said.

“A few decades ago, businesses did not transfer the risk of fluctuations in currencies, interest rates, or commodity prices but eventually stakeholders deemed risk retention unacceptable once risk transfer markets developed.

“Climate risk retention may soon be deemed unacceptable and if so, climate capital solutions will be the new imperative.”

The National Centre of Atmospheric Research estimates that the US economy can vary up or down by as much as $240 billion each year, as a result of day-to-day (non-catastrophic) weather fluctuations.

However, Resilience Economics claims that total risk transferred to the insurance sector amounts to just $3 billion, underlining the potential for growth in this sub-sector of the risk transfer industry.

Barney Schauble, managing partner at Resilience’s strategic partner Nephila, said: “We believe good advice around quantification and transfer of weather and climate risk is the critical key to unlocking the market potential and we are eager to support Resilience Economics and its clients in developing protection that responds to their specific exposures.”

Resilience has named Lynda Clemmons, a senior executive at NRA Energy, to its advisory board.

Alternative risk transfer expert Steve Evans’ website Artemis.bm said Resilience was targeting an area of risk that was underserved by traditional insurers and reinsurers.

The website added that “the use of technology alongside ILS-backed capacity and capital market techniques will mean its solutions can be delivered efficiently and effectively.

“This also means the opportunity is significant for Nephila Capital to put more of its risk capital to work in emerging areas, solving problems at the front end of the value-chain for corporates, institutions and sovereign entities, while adding another unique angle to its investor offering.

“Resilience Economics will look to take the climate risk discussion to the CFO level, where organisations and institutions will be receptive to solutions that can help to remove volatility caused by the weather out of their businesses.”