Value at Risk in each analysed year is expressed per hazard per asset and as an asset’s overall potential damage caused by climate-related hazards, as a proportional of the total asset value.
Maximum-to-date VAR% (MVAR)
Climate change models, like the weather, can be subject to lots of variability. Therefore, picking results from individual years for reporting risks delivering erratic results. There can also be long term trends which change – for example wetting for two decades followed by drying, which means it can be hard to say if the risk is going up or down.
Often the climate models do not increase consistently throughout time, due to factors such decreasing trends for part or all of a time series. The Climate Risk Engines are intended to build resilience to the worst possible conditions. This means that the Worst Risk through time should be held when moving past that point. As such the Climate Risk Engines performs maximum-to-date adjustments in post-processing, where results are run through a cumulative maximum, such that no year has a lower risk than the year before.