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

3.4.2 Sovereign bonds
As shown in Graph 3, sovereign bonds are 
a significant asset class within the average 
insurance investment mix.
To examine the relative risk of the sovereign bond 
portfolio to climate-related risks, a weighted 
ND-GAIN index was calculated, reflecting 
the weighted average ND-GAIN index of the 
sovereign bond portfolio of the insurance sector 
in a particular market, based on the top 10 
largest counterparties where this information 
was available. A higher score means lower 
risk in this index. The outcomes are shown in 
Graph 6, which shows the weighted ND-GAIN 
index on the right-hand axis and the distribution 
of the sovereign bond portfolio by geographic 
region and then by rating. Regional patterns with 
comparable outcomes could be identified for Asia 
and Oceania, Europe and North America, namely: 
relatively high ND-GAIN index, or relatively low 
risk in terms of climate change vulnerability and 
resilience. Conversely, Latin American insurance 
sectors showed exposures to countries with a 
lower ND-GAIN index. 
3.4.3 Real estate
As shown in Graph 3, real estate exposures 
make up a smaller asset class within the average 
insurance investment mix. For most regions,
the majority of the real estate portfolio from 
insurers is located in the home jurisdiction, 
therefore the weighted ND-GAIN vulnerability 
index largely reflects the ND-GAIN vulnerability 
index of the respective jurisdictions (lower score 
means lower risk). Graph 7 shows the ND-GAIN 
vulnerability score and the distribution of the real 
estate portfolio by region, again based on the top 
10 counterparties where this information
was available.
3.5 QUALITATIVE RESULTS
The relevance of climate-related risks for the 
insurance sector was confirmed in the qualitative 
responses from IAIS Members. When asked about 
their supervisory assessment of the relevance of 
transition and physical risks (in terms of probability 
and impact of the risk), Members referred to a 
significant risk that is increasing over time as 
illustrated in Graph 8.