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🌍 '''Climate change''' represents one of the most consequential systemic risks facing the global insurance industry, altering the frequency, severity, and geographic distribution of [[Definition:Natural catastrophe | natural catastrophe]] losses while simultaneously reshaping [[Definition:Underwriting | underwriting]] assumptions, [[Definition:Investment management | investment]] strategies, and [[Definition:Regulatory compliance | regulatory]] expectations. For insurers and [[Definition:Reinsurance | reinsurers]], climate change is not an abstract environmental concern — it is an actuarial reality that directly affects [[Definition:Pricing | pricing]] adequacy, [[Definition:Loss reserve | reserve]] sufficiency, and long-term solvency.

🔬 Insurers confront climate change through both physical and transition risk channels. Physical risk manifests as rising insured losses from more intense hurricanes, wildfires, floods, and convective storms, forcing [[Definition:Catastrophe modeling | catastrophe modelers]] to supplement historical data with forward-looking climate scenarios. Transition risk emerges as economies shift toward lower-carbon models — potentially stranding assets in carriers' [[Definition:Investment portfolio | investment portfolios]] or triggering [[Definition:Liability insurance | liability]] claims against companies perceived as contributing to environmental harm. [[Definition:Rating agency | Rating agencies]] and regulators now expect insurers to conduct climate stress testing and disclose exposures in line with frameworks like the Task Force on Climate-related Financial Disclosures (TCFD), embedding climate risk analysis into [[Definition:Enterprise risk management (ERM) | enterprise risk management]] processes.

🔮 Beyond its risk dimensions, climate change is catalyzing product innovation and market realignment across the industry. [[Definition:Parametric insurance | Parametric insurance]] products that trigger payouts based on measurable weather indices are gaining traction as conventional indemnity-based models struggle with escalating loss volatility. Some carriers are exiting high-exposure regions entirely — as seen in portions of the Florida and California homeowners' markets — while others partner with governments on [[Definition:Public-private partnership | public-private]] solutions to maintain insurability. The [[Definition:Protection gap | protection gap]] widened by climate-driven loss increases has become a defining challenge for the industry, testing whether insurers can continue to provide affordable [[Definition:Coverage | coverage]] in the areas where it is needed most.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Catastrophe modeling]]
* [[Definition:Natural catastrophe]]
* [[Definition:Parametric insurance]]
* [[Definition:Protection gap]]
* [[Definition:Enterprise risk management (ERM)]]
* [[Definition:Climate litigation]]
{{Div col end}}

Definition:Climate change - Revision history

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