Assessing Climate Risk for the Insurance Industry

This technical report provides an extended analysis of climate risk assessment frameworks specifically for the insurance industry. It discusses the increasing pressure on regulators and insurers to refine these frameworks due to the intensifying climate risks. The report outlines the role of climate scenarios and the limitations of current models, emphasizing the implications of recent regulatory developments from the European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA). It details how these developments aim to enhance climate resilience and improve risk-sharing mechanisms. The report also highlights the significance of Integrated Assessment Models (IAMs) in generating climate scenarios, which are crucial for insurers to assess potential impacts on claims and asset values. Furthermore, it addresses the challenges associated with generating reliable climate scenarios and the uncertainties involved in the modeling process. The analysis concludes by stressing the need for improved methodologies to effectively manage climate risks in the insurance sector.