Too Hot To Insure

Avoiding the insurability tipping point

Climate change continues to accelerate and increase the likelihood of significant disruptions to many communities around the world, including the insurance and broader financial sector. While governments, the broader businesses, and communities will need to do the heavy lifting to achieve the planned transition to net zero, the insurance sector has a critical role to play in facilitating a swift transition to a sustainable economy by supporting adequate risk adaptation, mitigation and coverage. To effectively support this, it is important for insurers to assess and address climate-related risk in their pricing and underwriting policies. 

Considering the significance of insurers' pricing and underwriting approaches in addressing climate-related risks, the Global Asia Insurance Partnership (GAIP) collaborated with Financial Stability Institute (FSI) on this paper to examine the current approaches in allowing for climate-related risk in insurer's pricing and underwriting policies, from both the regulatory and industry perspective. This paper draws on a survey of selected insurers and insurance regulators on the current state of development of responses to the increased risks facing global communities, particularly in Asia, due to climate change and how these are relevant for the insurance sector. The survey also elicited responses on future plans on these issues, potential implications, challenges and ways to overcome them.

Authors: Jeffery Yong, Felicia Khoo

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