Ortec Finance has released a 2025 update to its climate risk assessment for the European insurance industry, following the publication of its initial report last year.
The update applies Ortec Finance’s latest climate scenarios to evaluate the financial effects of climate change for European insurers and is intended for institutional investors, including CIOs, directors, actuaries and investment teams.
The report uses a top-down, multi-asset class approach to translate climate scenarios into financial outcomes. The analysis focuses on how climate-related developments affect insurers’ assets, liabilities and overall balance sheets under different assumptions.
The assessment notes that climate change is influencing the macroeconomic environment facing the European insurance sector. Rising physical climate risks are identified as a factor affecting insurability. Increasing claims and inflation contribute to higher policy payouts and premiums, impacting the provision of insurance coverage.
The report also reviews transition scenarios. While these scenarios involve steeper short-term drawdowns, they are associated with more favourable long-term macroeconomic conditions and contribute to maintaining premium affordability and stabilising policy payouts over time.
Geographical exposure is highlighted as an important consideration. Differences in the location of assets and liabilities affect how physical risks impact insurers’ balance sheets. The report further notes that climate change affects insurance lines differently, with property and casualty insurers’ liabilities more exposed to physical risks, while life insurers are more sensitive to macroeconomic conditions.
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