Insurance and Climate Change

𝗜𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝘄𝗶𝗹𝗹 𝗯𝗲 𝘁𝗵𝗲 𝗳𝗶𝗿𝘀𝘁 𝘀𝘆𝘀𝘁𝗲𝗺 𝘁𝗼 𝗰𝗿𝗮𝗰𝗸 𝘂𝗻𝗱𝗲𝗿 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸 — 𝗮𝗻𝗱 𝗶𝘁 𝘀𝗵𝗼𝘂𝗹𝗱 𝗰𝗼𝗻𝗰𝗲𝗿𝗻 𝘂𝘀 𝗮𝗹𝗹. Natural disasters caused $𝟯𝟲𝟴 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 in global economic losses last year, according to Aon — the ninth year in a row losses topped $300 billion. Only 𝟰𝟬% of those losses were insured. The protection gap is widening. As insurers retreat from high-risk regions, public safety nets — often overstretched — are stepping in. More households, businesses, and governments are being left to absorb risks they cannot afford. This isn’t just about insurance anymore. When insurance breaks down, so does credit. When credit dries up, property values fall, costs rise, and resilience weakens — just when it’s needed most. @Günther Thallinger 𝗳𝗿𝗼𝗺 𝗔𝗹𝗹𝗶𝗮𝗻𝘇 put it starkly: “𝘛𝘩𝘦𝘳𝘦 𝘪𝘴 𝘯𝘰 𝘤𝘢𝘱𝘪𝘵𝘢𝘭𝘪𝘴𝘮 𝘸𝘪𝘵𝘩𝘰𝘶𝘵 𝘧𝘶𝘯𝘤𝘵𝘪𝘰𝘯𝘪𝘯𝘨 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘴𝘦𝘳𝘷𝘪𝘤𝘦𝘴. 𝘈𝘯𝘥 𝘵𝘩𝘦𝘳𝘦 𝘢𝘳𝘦 𝘯𝘰 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘴𝘦𝘳𝘷𝘪𝘤𝘦𝘴 𝘸𝘪𝘵𝘩𝘰𝘶𝘵 𝘵𝘩𝘦 𝘢𝘣𝘪𝘭𝘪𝘵𝘺 𝘵𝘰 𝘱𝘳𝘪𝘤𝘦 𝘢𝘯𝘥 𝘮𝘢𝘯𝘢𝘨𝘦 𝘤𝘭𝘪𝘮𝘢𝘵𝘦 𝘳𝘪𝘴𝘬.” The Institute and Faculty of Actuaries (IFoA) project a 𝟱𝟬% 𝗰𝗼𝗹𝗹𝗮𝗽𝘀𝗲 𝗶𝗻 𝗴𝗹𝗼𝗯𝗮𝗹 𝗚𝗗𝗣 𝘄𝗶𝘁𝗵𝗶𝗻 𝗱𝗲𝗰𝗮𝗱𝗲𝘀 if climate risk is not properly managed. Climate risk is no longer a future scenario. It is here. It is compounding. And it is reshaping our economy in real time. There are positive signs: ➤ Hannover Re and Swiss Re are restricting fossil fuel underwriting. ➤ Parametric insurance models are speeding up disaster recovery. ➤ EIOPA and the European Central Bank are pushing for public-private risk sharing. These are encouraging — but early signs. 𝗠𝘆 𝘁𝗮𝗸𝗲: Climate risk is already disrupting the systems we rely on: insurance, credit, asset valuation, and public finances. Systems change is needed. The insurance sector holds a unique vantage point — but leadership now demands rethinking long-held assumptions about risk, resilience, and responsibility. The sector has an opportunity to lead: ➤ Embed forward-looking climate risk into underwriting ➤ Signal future exposures more transparently ➤ Drive transition finance to accelerate decarbonisation ➤ Redirect investment into adaptation ➤ Co-design shared risk pools and resilience bonds Collaboration between insurers, financiers, and governments is no longer optional — it is the foundation for economic stability in a climate-disrupted world. The sooner we align risk pricing with physical reality, the stronger our chances of building a more resilient economy for the future. #climaterisk #insurance #resilience #finance #sustainability #systemicrisk #adaptation –––––––––– For updates on sustainability, climate, and innovation, follow me on LinkedIn: @Scott Kelly

📊 Exciting new research from the European Central Bank (ECB) sheds light on how banks are pricing climate risk in their lending practices! 🌿 In their working paper, Carlo Altavilla, Miguel Boucinha, Marco Pagano, and Andrea Polo combine euro-area credit register data with carbon emission information to uncover fascinating insights into the intersection of finance and climate change. 🏦 The study finds that banks are indeed factoring climate risk into their lending decisions. Firms with higher carbon emissions face higher interest rates, while those committed to reducing emissions enjoy lower rates. Interestingly, banks that have publicly committed to decarbonization goals (through initiatives like Science Based Targets initiative) are even more aggressive in this pricing strategy. 💶 But here's where it gets really intriguing: the researchers uncovered a "climate risk-taking channel" of monetary policy. When the ECB tightens monetary policy, banks not only increase their overall credit risk premiums but also amplify their climate risk premiums. This means that during periods of monetary tightening, high-emission firms face a double whammy of increased borrowing costs and reduced access to credit compared to their greener counterparts. The authors argue that while restrictive monetary policy may slow down overall decarbonization efforts, it inadvertently creates a more favourable environment for low-emission firms and those committed to going green. 🌍 These findings are crucial for understanding how the financial sector is adapting to climate change and how monetary policy interacts with climate-related financial risks. It's also clear that the greening of finance is not just a trend, but a fundamental shift in how risk is assessed and priced in our economy. #ClimateFinance #SustainableBanking #MonetaryPolicy #ECB #GreenEconomy #ClimateRisk

75% of economic losses from natural catastrophes in Europe are uninsured. Last week, European Insurance and Occupational Pensions Authority (EIOPA) and the ESM - European Stability Mechanism publicly called for a European natcat insurance pool and backstop. This is much needed. The numbers that prompted this proposal are stark. European natcat costs have more than doubled in a decade, from €17.8bn to €44.5bn per year. Only 17% of European households are covered for natcat damage. In some EU countries, it’s less than 5%. When insurance retreats, the adverse effects pile up: mortgages become unavailable, reconstruction stalls, governments absorb costs they cannot sustain and the most vulnerable bear the heaviest burden. Without decisive action, climate risk might not remain insurable at all. The German Insurance Association recently warned that property insurance premiums could double within a decade due to climate‑driven claims. If coverage becomes unaffordable, or unavailable altogether, markets won't just reprice. They might shut down. The EIOPA/ESM proposal would help avoid that. Pooling risks across countries and perils would reduce the protection gap and increase resilience. The backstop would operate through loans, not grants, making it fiscally neutral by design. But there is no logic in mutualising the costs of climate disasters while continuing to finance their causes. Insurers who access such public support should maintain coverage in high-risk areas, co-invest in prevention, support build-back-better reconstruction and align their portfolios with credible transition plans. Risk-based pricing must remain the backbone, but paired with mechanisms that protect households and SMEs from unaffordable premiums during the transition. Adaptation must be rewarded. Nature-based solutions that reduce physical risk at source must be part of the equation. We should all – regulators, the insurance industry and civil society – work together to refine and implement this. It could be transformative.

40% of wildfire insurance claims are underpaid—what does that mean for LA wildfire victims? Imagine losing everything, only to find out your insurance payout won’t even cover the cost to rebuild. For many wildfire survivors, this is the harsh reality. On average, homeowners only get 72% of what they’re legally entitled to, leaving a gap of $200K-$300K to rebuild their lives. It’s not just the money—it’s the painstaking back-and-forth with insurers, the stress of providing documentation that may have literally turned to ash, and the realization that your policy might not stretch far enough. From price increases of coverage by lobbying to non-renewals to configuring emergency funds - it’s tough now. If you’re dealing with this right now, here are some steps to take to protect yourself and maximize your recovery:
- Know Your policy Inside-Out: Ask your insurer to break down exactly what’s covered—and what isn’t. Push back on vague answers. Look at your declaration page to know what’s covered and ask questions. 
- Get everything in writing: Phone calls are fine for quick updates, but always follow up with an email to create a paper trail.
-Don’t rush to settle: Insurers may try to pressure you into a quick payout. Take your time to review and, if necessary, bring in a claims advocate or attorney to fight for what you’re owed. Insurance claims and coverage has been interesting to say the least. It’s good to know your options. If you’re waiting and need help now, here are other options to explore: * Tap your 401(k): If you’re in a federally declared disaster area, you may qualify for penalty-free withdrawals. This can help with immediate costs while you work on rebuilding. Just keep in mind you’ll owe income tax unless you pay it back within three years. * Banks & creditors: Many have disaster relief programs—ask about deferred payments or waived fees. Know your terms and conditions. * Utility relief: Some companies offer temporary assistance to keep your lights on or your water running. * Mortgage help: Forbearance or deferral programs could give you breathing room while you recover. Most of us don’t have tens of thousands of dollars ready to go when disaster strikes. And that’s okay—what matters is knowing your resources and how to use them. Preparation isn’t about perfection; it’s about knowing where to turn when things go sideways. #personalfinance #insurance #californiawildfires

75% of climate damage in Europe is completely uninsured. Governments are stepping in as insurers of last resort, straining public budgets. The European climate protection gap is no longer an abstract warning from economists. It is an immediate financial reality. As extreme weather events like Southern European wildfires and Central European floods become more frequent, the traditional insurance model is stretching to its limit. When private coverage becomes unaffordable or unavailable, the fiscal burden falls directly on national governments and taxpayers. The European Central Bank and political institutions are raising alarms because uninsurable assets threaten broader financial stability and changing the European landscape. 1. The shift from private risk to public debt With only a fraction of climate losses covered by insurance, state budgets are forced to absorb billions in emergency recovery costs. This creates severe fiscal volatility for governments already navigating tight budgets. 2. Premium inflation and coverage deserts Reinsurers are re-evaluating risk models across Southern and Central Europe. As premiums rise, property owners are priced out, creating geographic areas where standard coverage is virtually unobtainable. 3. The rise of mandated resilience and adaptation Financial regulators are moving toward frameworks that require proactive adaptation. Insurance will increasingly depend on verified resilience measures rather than simple risk transfers after a disaster occurs. We must pivot from paying for damage after the fact to investing in pre-disaster resilience. Great article on this today from POLITICO Europe https://lnkd.in/d_Ck5kem

A powerful staff report and open-access dataset from the US Senate Budget Committee shows that climate change is increasingly upending the US insurance market. Here's how. “𝗖𝗹𝗶𝗺𝗮𝘁𝗲 𝗰𝗵𝗮𝗻𝗴𝗲 𝗶𝘀 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗮𝗯𝗼𝘂𝘁 𝗽𝗼𝗹𝗮𝗿 𝗯𝗲𝗮𝗿𝘀 𝗮𝗻𝗱 𝗺𝗲𝗹𝘁𝗶𝗻𝗴 𝗶𝗰𝗲𝗯𝗲𝗿𝗴𝘀 𝗮𝗻𝘆𝗺𝗼𝗿𝗲. 𝗜𝘁’𝘀 𝗮𝗹𝘀𝗼 𝗮𝗯𝗼𝘂𝘁 𝗰𝗹𝗶𝗺𝗮𝘁𝗲-𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗯𝗹𝗲𝗲𝗱𝗶𝗻𝗴 𝗳𝗮𝗺𝗶𝗹𝘆 𝗯𝘂𝗱𝗴𝗲𝘁𝘀—𝘄𝗶𝘁𝗵 𝗵𝗶𝗴𝗵𝗲𝗿 𝗰𝗼𝘀𝘁𝘀 𝗳𝗼𝗿 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲, 𝗴𝗿𝗼𝗰𝗲𝗿𝗶𝗲𝘀, 𝗮𝗻𝗱 𝗵𝗲𝗮𝗹𝘁𝗵 𝗰𝗮𝗿𝗲—𝗮𝗻𝗱 𝗰𝗮𝘀𝗰𝗮𝗱𝗶𝗻𝗴 𝗲𝗰𝗼𝗻𝗼𝗺𝘆-𝘄𝗶𝗱𝗲 𝘀𝗵𝗼𝗰𝗸𝘀. 𝗪𝗵𝗮𝘁 𝗼𝘂𝗿 𝗻𝗲𝘄 𝗱𝗮𝘁𝗮 𝗿𝗲𝘃𝗲𝗮𝗹 𝗶𝘀 𝘁𝗵𝗮𝘁 𝘁𝗵𝗲 𝗳𝗮𝗶𝗹𝘂𝗿𝗲 𝘁𝗼 𝗱𝗲𝗮𝗹 𝘄𝗶𝘁𝗵 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗰𝗵𝗮𝗻𝗴𝗲 𝗶𝘀 𝗮𝗹𝘀𝗼 𝗮𝗳𝗳𝗲𝗰𝘁𝗶𝗻𝗴 𝘄𝗵𝗲𝘁𝗵𝗲𝗿 𝗳𝗮𝗺𝗶𝗹𝗶𝗲𝘀 𝗰𝗮𝗻 𝗲𝘃𝗲𝗻 𝗴𝗲𝘁 𝗵𝗼𝗺𝗲𝗼𝘄𝗻𝗲𝗿𝘀 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲, 𝘄𝗵𝗶𝗰𝗵 𝘁𝗵𝗿𝗲𝗮𝘁𝗲𝗻𝘀 𝘁𝗵𝗲𝗶𝗿 𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝘁𝗼 𝗴𝗲𝘁 𝗮 𝗺𝗼𝗿𝘁𝗴𝗮𝗴𝗲, 𝘄𝗵𝗶𝗰𝗵 𝘀𝗽𝗲𝗹𝗹𝘀 𝘁𝗿𝗼𝘂𝗯𝗹𝗲 𝗳𝗼𝗿 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝘆 𝘃𝗮𝗹𝘂𝗲𝘀 𝗶𝗻 𝗰𝗹𝗶𝗺𝗮𝘁𝗲-𝗲𝘅𝗽𝗼𝘀𝗲𝗱 𝗰𝗼𝗺𝗺𝘂𝗻𝗶𝘁𝗶𝗲𝘀 𝗮𝗰𝗿𝗼𝘀𝘀 𝘁𝗵𝗲 𝗰𝗼𝘂𝗻𝘁𝗿𝘆. -Chairman Sen. Sheldon Whitehouse Key takeaways in the new data: -Climate change is driving increasing non-renewal rates. The data confirm that the states and counties most exposed to climate-related risks, like wildfires or hurricanes, are among those with the highest non-renewal rates and the highest growth in non-renewal rates. -Insurance non-renewals are not exclusively a problem for communities typically seen as being on the front lines of climate change. Florida, California, and Louisiana have been seen as the canaries in the coal mine, but the Committee’s data make clear that areas such as southern New England, parts of Montana, coastal and inland North Carolina, coastal regions of New Jersey, New Mexico, South Carolina, and even Oklahoma, among others, are not far behind. -Across the United States, there is a clear positive correlation between rising non-renewal rates and rising premiums—and a similar correlation between annual premium rate changes and non-renewal rate percentage point changes over time—demonstrating that climate change has become a major cost-of-living issue for families across the country. Check out the data and report here: https://lnkd.in/eWuQgyVB #climate #america #insurance #climaterisk #US #climatechange #climatefinance #mortgages #finance

I am happy to co-author this article with Beatrice WEDER DI MAURO, President of the CEPR - Centre for Economic Policy Research, reflecting on the urgent need to engage in collective thinking and action to adapt our response to the challenge of insurability in the face of escalating climate risks. This article, which captures key convictions from our joint workshop hosted at Collège de France by the AXA Research Fund and CEPR - Centre for Economic Policy Research, couldn't have been more timely.   Devastating floods in Valencia, the wildfires in Los Angeles, the typhoons in Mayotte and La Réunion... These recent climate catastrophes show a clear reality: climate risks are intensifying and the protection gap for local communities and economies are becoming evident. Global economic losses from extreme weather events reached $320 billion in 2024, while in Europe, only 25% of economic losses were insured - leaving individuals, businesses, and communities vulnerable.    To address this, we need to enhance risk-sharing mechanisms and promote partnerships between public institutions and private companies.   Ensuring insurance accessibility and effectiveness is crucial. This can be done through: ➡️ Hybrid models, combining market mechanisms with public-private partnerships, to help ensure broad coverage and affordability. France’s CatNat regime and Switzerland’s hybrid model offer valuable insights. These models can be adapted to regions facing extreme exposure, such as sea level risks. ➡️ Greater investment in prevention and risk-sharing mechanisms. Initiatives like local municipal risk assessments can help small municipalities assess and mitigate local climate risks. ➡️ Impact underwriting, where insurers incentivize policyholders to adopt risk-reducing measures in exchange for lower premiums. ➡️ Public education on climate risks and stronger coordination between insurers, governments, and consumers to ensure preventive measures are taken seriously.   As we move forward, it's clear that policymakers, insurers, and society must work together to strike a sustainable balance between affordability and fiscal viability. This is not just about who pays the bill. It is about how we manage risk in an increasingly uncertain climate landscape. Let's continue to foster collaboration and innovation to close the protection gap and build a resilient future. 👇 https://lnkd.in/er6BkrtZ

🏠🌪 As climate disasters intensify, the hidden fault lines in our financial system are starting to crack—especially in the mortgage and insurance sectors. For decades, mortgage lenders have relied on homeowners insurance as a shield against loan losses. But today, that shield is weakening. Skyrocketing premiums, insurer withdrawals, and flood insurance gaps are leaving millions of households—and their mortgages—vulnerable. 📉 A new national analysis from First Street shows that #climaterisk has become the 6th “C” of credit, joining character, capacity, capital, collateral, and conditions. Why? Because physical climate risk is now driving mortgage defaults—especially from floods—and conventional credit models are failing to capture these losses. 💰 In fact, climate-driven credit losses could cost U.S. banks: $1.2 billion by 2025, and $5.4 billion by 2035, even without accounting for indirect economic shocks like housing downturns. 🌊 Floods are the leading peril, particularly damaging in areas outside FEMA flood zones, where insurance isn’t mandatory. Following disasters like Hurricane Sandy, banks faced tens of millions in hidden losses—unforeseen and unmodeled. 📉 Rising insurance premiums are also forcing borrowers to absorb more risk. For every 1% increase in insurance costs, the foreclosure rate ticks up by over 1%. At the same time, household savings have shrunk to just 4.6% of disposable income. 👉 The message is clear: climate risk is credit risk. If lenders don’t integrate high-resolution climate data into their risk models, they risk being blindsided by the next disaster—not just physically, but financially. Read the report here 👇 https://lnkd.in/edmCrQY8

🌟 Insurance died in 2040. This isn't fiction—it's Scenario 4 from the SAS + Economist report. 💫 Here's why 2024's hurricane season makes this terrifyingly relevant for #ITCVegas. Remember Katrina? $125 billion in damages. Models called it a "1-in-100 year event." Then came Sandy (2012), Harvey (2017), Ian (2022). In 2024 alone: Beryl, Helene, Milton—each "unprecedented" until they weren't. Milton intensified from Cat 1 to Cat 5 in 24 hours. Most models? Still playing catch-up. The pattern is screaming at us: What Katrina taught us about model failure in 2005, Milton confirmed in 2024. The "black swans" aren't rare anymore—they're migrating in flocks. This isn't dystopian fiction—it's a meticulously researched scenario from SAS & The Economist, showing what happens when our industry chooses paralysis over progress. By 2035 in our scenario, AI was heavily regulated (thanks to backlash), innovation budgets were slashed, and cyberattacks had surged. The digital revolution we're banking on? Strangled by fear and regulation. The polycrisis accelerates: 📍 Today (2025): Back-to-back billion-dollar disasters are the new normal 📍 2031: Models fail catastrophically—think Katrina x10, everywhere 📍 2035: AI becomes the scapegoat, innovation dies 📍 2037: Multiple Milton-scale events hit simultaneously 📍 2039: Coastal, crop, health, SME coverage—uninsurable 📍 2040: Not bankruptcy—complete market paralysis Here's what keeps me up: In 2005, Katrina exposed insurers' model weaknesses. In 2024, Milton showed the sector hasn't fixed them. The Scenario 4 report suggests we have 6 years before the point of no return. The $1.1 trillion question: Florida's insurance market is already in crisis mode. California's wildfire coverage is evaporating. What happens when EVERY state becomes Florida? Three uncomfortable truths: 1️⃣ Most insurers' risk models are still using yesterday's climate to price tomorrow's disasters 2️⃣ Every "unprecedented" event becomes precedent for worse 3️⃣ The protection gap isn't growing—it's exploding Which path are we on? 1️⃣  Innovation pathway: AI-powered resilience 2️⃣  Adaptation pathway: Painful but survivable 3️⃣ Scenario 4: Total system failure Look at your innovation budget. Look at your regulatory stance. Look at how you priced Milton. Which scenario do YOU think we're heading toward? This is THE conversation we will be delving into at InsureTech Connect this year. Scott Gunther from Firemark Ventures, AJ Fang from Assurant Ventures, Franklin Manchester, from SAS, Denise Garth from Majesco, William Ross and William Steenbergen from Federato , Yandy P. from DataHaven Software, Sri Ramaswamy from Charlee.ai will discuss this as part of our #AIHorizons2030 mini-summit with 50 executives. #ClimateRisk #ITCVegas #RiskManagement

Heat. Air Quality. Insurance Costs. An Indian Reality We Must Confront. Reflecting on a recent article I read around on how global heatwaves, air pollution, extreme weather are no longer distant threats. They’re having real, measurable impacts on homes, health, and financial risk. As an insurance broker, I believe it’s our duty to understand these changes, and help India stay resilient. Here’s what our sector should be really be thinking about:   What’s Changing, and Why It Matters 1. Rising temperatures and worsening air quality are more than environmental issues, they lead to greater health risks (respiratory, cardiovascular), increased mortality, and greater stress on medical systems. 2. Homes in many Indian cities are more exposed: ageing infrastructure, poor insulation or ventilation, and limited cooling systems magnify heat stress. 3. As insurers factoring in more frequent claims for heat damage, pollution-related losses, and weather disasters, premiums go up. That may make cover harder to access for many.   What the Insurance Industry Must Do 1. Embed Climate & Health Risk into Underwriting We need granular data: mapping risk zones for heat, pollution, flood etc., and using that to price fairly. Homes in “hot-spots” may need additional risk mitigation built into policies. 2. Design Products that Pay for Prevention Develop solutions that reward preventive measures, from cool roofing and air filtration to safer construction practices, where it is best to avoid the use of hazardous materials like asbestos. Parametric/trigger-based covers can also play a role, activating when thresholds such as heat index or AQI are breached. 3. Educate and Partner with Clients Many customers are unaware of how indoor heat or local air quality can damage property, health, and finances. Brokers must become educators, helping people assess risk, explore mitigation, reduce exposure. 4.Collaborate with Regulators & Local Governments Building codes, city planning, heat-mitigation infrastructure, pollution control, these are public goods that reduce risk for everyone. Working together can help reduce insurance risk, keep costs manageable, and make adaptation scalable. Why This Is a Leadership Opportunity India is uniquely placed. We have diverse climates, rapid urbanisation, and growing awareness. By acting now: Build trust: clients will value brokers who anticipate change, offer stable, forward-looking solutions. Drive innovation: those who develop climate-resilient products will lead, not lag, as regulation and customer expectations evolve. The realities of climate change are here and so are opportunities: to protect, to innovate, to lead. Insurance isn’t just about recovering losses, it’s about building resilience and enabling safer, healthier lives. #ClimateRisk #IndiaResilience #HealthAndClimate #RiskManagement https://lnkd.in/dYrveZd3