What the Market Thinks: How Global Insurers are Responding to Rising Physical Risk
Alongside MSCI Institute, our team spoke with 50 insurers managing the risks and opportunities of climate change.
The report features forwards from leaders at the United Nations Environment Programme Finance Initiative and Lloyd's Market Association.
Here are our 3 key takeaways:
A looming infrastructure insurability crisis
Infrastructure insurability crisis: 96% of insurers see a coming market failure.
Physical risk is creating a very real concern about systemic financial risk. As the insurability of infrastructure, a long-lived asset, becomes unavailable or unaffordable, this becomes a transmission channel for physical risk to spread to banks, capital markets, and public finances.
In regions like North America and APAC, management frameworks are already being adjusted to incorporate systemic risks.
A model timing problem
Today fewer than 1 in 5 insurers meaningfully integrate forward-looking climate scenarios into pricing, but nearly 90% say they would if scenarios focused on 2030 instead of 2050. Scenarios through 2030 are better fit for underwriting decisions like pricing and risk selection.
Areas for growth
Insurers across all regions view climate advisory as the best new opportunity today and see opportunities in adaptation, nature, and resilience tomorrow. Climate risk management and resilience advisory services, longstanding offerings of insurers, are being transformed by physical risk like flood exposure and wildfire risk.
_____
What the market thinks: How global insurers are responding to rising physical risk