Assessing and managing climate change risk, both physical and transitional, has become increasingly important in the insurance industry. Potential impacts of climate change range from extreme weather events to changes in ecosystems and human livelihoods. The growing threats of extreme weather and climate tipping points create risks to financial markets and are causing increasing concern about their impact on the insurance industry.
In addition to the physical risks associated with climate change, recent SEC (Securities and Exchange Commission) filings have changed the disclosure rules for businesses, leading to greater uncertainty and concerns surrounding transitional climate risk.
A new Conning Focus Report, “Climate Risk: An Imminent Threat to Business” provides findings from a recent insurance executive survey. Conning’s Insurance Research and Risk Solutions groups conducted a survey of insurers to gauge the sentiments of industry executives on climate risk. Most ( 91%) respondents expressed “significant” concern regarding the impacts of climate as a physical and transitional risk for their businesses, with the remaining 9% acknowledging at least minor risks.
“60% of executives indicated plans to invest in tools, vendors, data, and underwriting practices to enhance climate risk assessments. The survey also found that smaller insurers—those underwriting less than $5 billion in direct premiums, accounting for 53% of the market— as a significant segment seeking additional support in managing the challenges posed by climate risk,” said Manu Mazumdar, a Director and Head of Data Analytics and Insurance Technology in Conning’s Insurance Research group, and principal author of the climate risk study.
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