Ester Calavia Garsaball senior director, Natural Catastrophe & Risk Financing, Climate Practice, WTW examines how organisations and the utilities they depend on risk being exposed to the same hazards, challenging traditional risk management and recovery planning.

Extreme weather events are now happening with growing frequency and over larger areas. Global insured losses from natural catastrophes have more than doubled in real terms over the past 30 years, according to Swiss Re Institute. The uninsured portion of economic losses from natural disasters regularly exceeds 50%, leaving businesses to absorb the financial shock.

Both an organisation and the utilities it depends on can be exposed to the same hazards, challenging traditional risk management and recovery planning.

A severe winter storm or flood can damage both a company’s facilities and utility networks, extending downtime and driving higher business interruption losses. For example, during the 2021 Texas winter storm Uri, the same extreme cold that shut down manufacturing facilities also crippled the power grid serving them. Businesses were left without electricity for up to two weeks, and the wider economic impact of the storm has been estimated at up to $130 billion.

As well as extreme single weather events, utility networks face pressure from chronic hazards; from heatwaves that push transformers beyond safe operating temperatures, to droughts that disrupt water treatment plants and industrial water supplies.

Unlike acute events which cause sudden, visible damage, chronic hazards build pressure gradually and can weaken infrastructure over time before a failure becomes apparent.

When climate-related exposures are more intense, more interconnected and more likely to affect entire regions than historically, organisations may need to change their risk management and planning assumptions.

Resilience against connected utility risks starts with an organisation seeing its operations more clearly and understanding where its power, water and critical services really come from to spot the weak links.

Natural hazards and the danger of false assumptions

Many organisations tend to underestimate how long utilities take to recover after extreme weather events, either assuming restoration will happen quickly or that outages will remain highly localised.

But today, chronic stresses such as persistent heat, drought and grid instability are degrading equipment and raising vulnerabilities across regions. Some organisations may discover the operational risks too late: generators that need fuel trucks that can’t reach them; cooling systems that fail under sustained heat, water stress affecting treatment facilities that serve entire districts.

These blind spots can happen if business planning is over-optimistic, over-focused on internal resilience and fails to consider shared exposures.

Mapping utility dependencies to manage shared climate risks

Resilience to shared climate risks needs an accurate picture of a company’s dependency chains. Geographic information systems, satellite data and local infrastructure maps can pinpoint where power plants, substations, water treatment facilities and pipelines sit relative to an organisation’s key sites. This can be supplemented with direct information from suppliers by asking simple but essential questions: who provides your power and water and where are those assets located? Mapping this information can reveal how far locations depend on the same infrastructure or face the same natural hazards, uncovering shared exposures that traditional risk assessments often overlook.

Quantifying the operational and financial effect of utility outages

Quantifying correlated utility risk requires realistic assumptions. Evaluating the effect of one to two-week outages in which both the facility and the utility provider are disabled is likely to provide a more accurate basis for estimating business interruption losses.

Structured vulnerability scores that weight supply infrastructure, backup systems, recovery ability and historical performance can refine these assessments. By linking operational thresholds to financial outcomes, a business can also identify where outages create the greatest losses to determine which mitigations deliver the highest value.

These engineering‑led approaches can translate complex shared‑risk scenarios into clear, practical insights, supporting more informed discussions with insurers and help to prioritise resilience investments where they matter most. We recently completed a utility vulnerability assessment for a semiconductor manufacturer that experienced business interruption losses after the Texas 2021 freeze. The assessment helped prioritise its resilience investments and negotiate a $100M additional capacity with insurers.

Sharing nat cat and climate risks with utility networks

Identify and focus on the dependencies that matter most, specifically, which systems would stop revenue within 24 hours if they failed. Which would take more than a week to restore and what would be the financial impact?

Scenario analysis can help organisations understand those dependencies that would drive the largest losses and shape more effective recovery plans. Running scenarios that account for chronic and acute events can also show which operations need to resume first and those able to remain offline temporarily.

Weather forecasting services and sensor networks can also give a business critical lead time to act before utility outages cascade.

Temperature sensors on transformers, water-level monitors at supplier facilities and predictive analytics tied to chronic hazards can help identify when a disruption is likely. These windows of opportunity can be critical to activating resilience plans, adjusting production, or shutting down equipment safely to lessen the impact of severe weather events.

Once a disruption is identified as being likely, predetermined response protocols, such as switching to backup power, sourcing water via tankers, or temporarily reducing production, can mean the difference between a managed response and an unplanned crisis.