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

Graph 19:
Macroprudential climate risk analysis 
Graph 20:
Overview of supervisory measures taken or planned to be taken

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6. CONCLUSIONS
C
limate change poses a material risk to 
the economy and the financial sector, 
including the insurance sector. Changes 
in climate are already leading to more extreme 
and frequent weather-related events, thereby 
increasing the physical risks to which insurers 
are exposed. Transition risk is also highly relevant 
for insurers, with the magnitude of the risk 
dependent on various factors, including the pace 
of policy action and future changes in technology. 
Insurers will need to manage their investment 
exposures to those assets and sectors that are 
most vulnerable to transition risks. At the same 
time, the financial sector at large, including 
insurers and asset managers, is increasingly 
looking at ways to support a transition to net-zero 
emissions by reallocating investments to more 
sustainable investment opportunities.
Despite the increasing attention of the insurance 
sector (including policymakers and supervisors) 
to the financial risks posed by climate change, 
to date there is still little evidence on the 
magnitude of these risks – in particular at a 
cross-jurisdictional level. This report represents 
the first global deep dive analysis on insurers’ 
investment exposures to climate-related 
risks, building on data collected from 32 IAIS 
Members covering 75% of the global insurance 
market and including a forward-looking scenario 
analysis, with the aim of providing insurers and 
supervisors with valuable information about 
insurer climate exposures.
The scenario analysis in this study is only a first 
step towards an assessment of the impact of 
climate change, including a possible disruptive 
transition, on the insurance sector. The 
outcomes of the scenario analysis depend partly 
on assumptions and methodological choices. 
Moreover, as climate change scenario analysis 
is a relatively new field of study, the uncertainty 
surrounding the assumptions is larger than in 
conventional stress tests or scenario analyses.