Insurance Industry Confronts Growing Climate Risks, Urges Resilience Funding

Global insurance premiums for climate‑related hazards rose 12% in 2023, reflecting insurers' expanding role in adapting to more frequent extreme weather. Companies such as Swiss Re have integrated climate scenario analysis into most underwriting, while parametric products are gaining use in regions like Southeast Asia and the Caribbean.

The sector faces deep challenges: under‑insurance leaves about 60% of climate losses in low‑income nations uncovered, and reinsurance costs jumped 18% year‑on‑year. Governments are stepping in— the EU’s Climate Adaptation Strategy and India’s expanded crop‑insurance scheme aim to close gaps, and the UN estimates $1.3 trillion per year is needed for adaptation, with insurance expected to supply 20% by 2030.

A new report by TheCityUK and Marsh warns that rising climate risk threatens financial stability by widening the protection gap and making coverage more expensive. It calls for blended finance, public‑private partnerships, greater use of parametric insurance and insurance‑linked securities, and for capital markets to price physical climate risk more proactively.