Gimar special topic edition the impact of climate change on the financial stability of the insurance sector

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3. ASSESSMENT OF 
CLIMATE-RELATED 
RISKS TO INSURERS’ 
INVESTMENTS
I
n this report, the analysis of risks stemming 
from insurers’ investment exposures to 
climate change follows a two-step approach. 
The first step, in this section, consists of 
assessing the size and nature of the climate-
relevant exposures and their materiality on 
insurers’ balance sheets. This analysis aims to 
provide an initial indication of the relevance of 
climate-related risks to the insurance sector’s 
investment portfolio. The second step is to 
analyse the potential losses for the insurance 
sector stemming from different forward-looking 
scenarios (see section 4).
3.1 METHODOLOGY FOR DERIVING CLIMATE 
RISK EXPOSURES 
The analysis starts by identifying insurers’ 
exposures to climate-relevant assets: this means 
classifying sectors and jurisdictions into different 
categories depending on their sensitivity to 
climate-related risks. Insurers’ investments are 
then mapped to those categories.
The analysis covers the asset classes most 
relevant for insurers, namely equity, sovereign 
bond, corporate bond, real estate, and loans 
and mortgages. To select those assets, the IAIS 
considered:
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The materiality of those asset classes in the 

insurers’ balance sheets 
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Their relevance for climate risk, ie the extent 

to which physical and/or transition risks can 
impact the performance of those assets
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The availability of data, ie the extent to which 

it is possible to distinguish between climate-
relevant and other assets within these asset 
classes (existence of a taxonomy).
On aggregate, insurers’ investment assets are 
typically composed as follows (from most to 
least material):
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