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Financial discipline overview

Financial discipline overview

Insurance is the financial discipline of pricing, pooling and transferring risk. This page, part of Insurance Nexus at The Global Risks Alliance (GRA), sets out how the sector works as a system: who carries risk, how capital supports it, how regulation shapes it and where systemic questions arise. It treats insurance operations as a subject of research, not execution; GRA performs no insurance activity of its own.

Publisher
The Global Risks Alliance
Field
Insurance and catastrophe, Climate and hazards, Health and biosecurity
Status
Established
Service level
R0: information and enquiries

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NASA GIBS / EOSDIS · ASTER GDEM (METI, NASA) · Blue Marble (NASA) · © OpenStreetMap contributors (ODbL) · Natural Earth

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For financial discipline overview, in GRA's spatial-finance reading, the map opens on population density and night lights with built-up and settlement extent from NASA GIBS, framed on World; every other NASA layer, live feed and forecast waits in the layer list.Satellite and model products as NASA publishes them, each with its own date; indicators, not assessments of any place; claim ceiling INTEGRATED.

Data: NASA GIBS · ASTER GDEM · Blue Marble · © OpenStreetMap contributors · Natural Earth · CIESIN/Columbia, NASA SEDAC HBASE · GDACSSources and licences

  • We acknowledge the use of imagery provided by services from NASA's Global Imagery Browse Services (GIBS), part of NASA's Earth Science Data and Information System (ESDIS). Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). NASA open data
  • We acknowledge the use of imagery provided by services from NASA's Global Imagery Browse Services (GIBS), part of NASA's Earth Science Data and Information System (ESDIS). Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). NASA open data
  • Center for International Earth Science Information Network (CIESIN), Columbia University. 2018. Gridded Population of the World, Version 4 (GPWv4): Population Density, Revision 11. NASA Socioeconomic Data and Applications Center (SEDAC). Licensed under CC BY 4.0. Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). CC BY 4.0
  • VIIRS Black Marble night-time lights, NASA Goddard Space Flight Center; distributed by the NASA Level-1 and Atmosphere Archive and Distribution System (LAADS DAAC); imagery via NASA GIBS. Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). NASA open data
  • VIIRS near-real-time products (flood, land surface temperature, snow cover, corrected reflectance), NASA LANCE; imagery via NASA GIBS. Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). NASA open data
  • GPM IMERG precipitation, NASA Precipitation Processing System; distributed by the NASA Goddard Earth Sciences Data and Information Services Center (GES DISC); imagery via NASA GIBS. Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). NASA open data
  • GHRSST Level 4 MUR analyses, NASA Jet Propulsion Laboratory; distributed by the NASA Physical Oceanography DAAC (PO.DAAC); imagery via NASA GIBS. Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). NASA open data
  • ASTER GDEM is a product of METI and NASA (ASTER Global Digital Elevation Model V003, NASA LP DAAC); imagery via NASA GIBS. Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). NASA open data
  • Made with Natural Earth. Free vector and raster map data @ naturalearthdata.com. Public domain
  • © OpenStreetMap contributors (ODbL), via NASA GIBS (coastlines, boundaries, roads and place names). Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). ODbL
  • Blue Marble, NASA Earth Observatory; imagery via NASA GIBS. Colours redrawn from the published colour map; values averaged into H3 cells where shown (modified). NASA open data
  • Context on the globe and flat map: coastlines, boundaries, roads and place names from NASA GIBS reference layers (OpenStreetMap data, ODbL, © OpenStreetMap contributors); Blue Marble imagery as an optional base; 3D terrain and the elevation read-out from the ASTER GDEM elevation colour index (5 m to 200 m classes, exaggerated for legibility). Boundaries are drawn as published and imply no position on any territory.
  • Globe: MapLibre GL JS 6.9.1, BSD-3-Clause, © MapLibre contributors.
  • Context: CIESIN/Columbia, NASA SEDAC HBASE. Center for International Earth Science Information Network (CIESIN), Columbia University, and NASA Socioeconomic Data and Applications Center (SEDAC): Global Human Built-up And Settlement Extent (HBASE) 2010; Seto, Guneralp and Hutyra 2012, Global Grid of Probabilities of Urban Expansion to 2030; Global Urban Heat Island (UHI) Data Set, 2013.
  • Live: GDACS (EC JRC / UN OCHA) Events are indicative, not official warnings.
  • Optional layers (35 sources in the layer list: live, forecast, observed and context) print their provider credit on the map and here when switched on; forecasts are model output and derived indices are estimates.

Layers and dates

  • Population density, 2020: Population: CIESIN, Columbia University, Gridded Population of the World v4.11 (2018), NASA SEDAC, CC BY 4.0 · static
  • Night-time lights, daily: VIIRS Black Marble (VNP46A2), NASA LAADS DAAC · 12 Oct 2026
  • Flood water, 3-day composite: VIIRS Global Flood Product, NASA LANCE · 14 Oct 2026
  • Land surface temperature, day, 8-day composite: VIIRS NOAA-20 Level 3, 8-day, NASA LANCE · 14 Sep 2026
  • Precipitation rate, daily mean: GPM IMERG, NASA GES DISC · 12 Oct 2026
  • Sea surface temperature anomaly: GHRSST MUR25, NASA JPL PO.DAAC · 12 Oct 2026

GeographyFor financial discipline overview, in GRA's spatial-finance reading, the map opens on population density and night lights with built-up and settlement extent from NASA GIBS, framed on World; every other NASA layer, live feed and forecast waits in the layer list.

STEM methods
5
Canonical methods this field applies
Topics
9
Subject pages in the field
Counterparts
13
Platforms in shared fields at GCRI, GRF and GRA
Report series
2
Nexus Reports series it contributes to
01In brief

The short answer.

The Insurance Nexus sector overview covers insurance-sector risk governance, underwriting-relevant knowledge and risk protection gaps without underwriting. It sets out who is in scope, from insurance risk professionals as well as brokers and insurers, how risk reaches the sector and how it travels onward, analysed with exposure analysis, risk transfer concepts and protection gap studies. GRA builds shared industry understanding and does not advise, rate or assess individual firms.

02Canvas

One field, three institutions.

Canvas · one field, three institutionsDesign, not a record
One field, three institutions: Insurance Nexus and its counterpartsGCRI studies the field as science, GRF governs and convenes it, GRA builds shared financial understanding; the Nexus Universe tests work across them and the competent authorities decide. Design of the arrangement, not a record.

Fig.How GCRI, GRF and GRA share one field while the authorities decide. Design, not a record.

03Console

Field overview, in outline.

The working screen behind this subject: its structure, terms and states. Names are placeholders and values illustrative.

Field overview: the screen's structure, terms and states for Insurance.Placeholder names and illustrative values; a design, not a record or a live system.
04How the sector works

Pooling, capital and transfer.

An insurer collects premiums from many policyholders, invests them and pays claims as losses occur. Its solvency depends on pricing risk adequately, holding enough capital for bad years, and matching investments to the timing of its liabilities. Reinsurers take on part of insurers' risk, particularly from catastrophes, and capital markets increasingly share it through instruments such as catastrophe bonds. Brokers and agents connect buyers with carriers; actuaries estimate liabilities and price products.

Regulators supervise insurers to protect policyholders, generally through risk-based capital requirements, governance standards and conduct rules. International standards are developed through the International Association of Insurance Supervisors. Accounting standards shape how liabilities and profits are reported.

05Supervision

Who supervises insurance, and how the regimes differ.

RegimeCapital basisClimate expectations
Solvency II (EU), with 2025 review applying from January 2027One-year 1-in-200 value at risk on economic balance sheetClimate scenarios in the ORSA where material
Insurance Capital Standard (IAIGs)Group prescribed capital requirement adopted in 2024Through ICPs and the 2025 climate application paper
US risk-based capital (NAIC)Factor-based RBC with a catastrophe risk chargeNAIC climate risk disclosure survey aligned with TCFD
Takaful regimesIFSB standards adapted locallyVaries by jurisdiction
06Systemic questions

Where shared understanding is needed.

  1. 01

    Correlated losses

    Events that strike many policyholders at once, such as catastrophes, pandemics and cyber incidents. See property and casualty.

  2. 02

    Insurability

    Whether rising or uncertain risks can still be priced and covered. See climate and nature risk.

  3. 03

    Protection gaps

    Losses that fall outside insurance, onto households, firms and governments. See insurance protection gaps.

  4. 04

    Models and data

    How models and AI shape pricing, and their limits. See underwriting and pricing risk and insurtech and AI.

  5. 05

    Market structure

    How roles, concentration and capital flows affect resilience. See insurance market structure.

07Research, not execution

What GRA does and does not do here.

GRA studies the sector at aggregate level. It does not assess individual firms, recommend products or counterparties, or advise on any transaction. How risk moves into and out of the sector is set out on financial-system transmission. Hazard science comes from Climate and Hazards at The Global Centre for Risk and Innovation (GCRI), and wider stability questions are examined by Financial Stability.

GRA does not underwrite, sell, solicit, negotiate, place or broker insurance, and it does not rate, advise on or arrange transactions. Readiness work is not approval.

08Key terms

Terms used on this page.

Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.

TermDefinition
Transmission channelThe route by which a shock reaches financial institutions' balance sheets.
Insurance riskThe risk that claims and related expenses differ from what was assumed when policies were priced and reserved, through frequency, severity, timing or accumulation.
Protection gapThe share of economic loss from an event or risk that is not covered by insurance and falls on households, firms or public budgets.
Systemic riskThe risk of disruption to financial services caused by impairment of all or parts of the financial system, with serious consequences for the real economy, as the IMF, FSB and BIS define it.
10Pages

Pages in Financial discipline overview.

11Questions

Questions and answers.

Does GRA advise insurers?
GRA does not underwrite, sell, solicit, negotiate, place or broker insurance, and it does not rate, advise on or arrange transactions. Readiness work is not approval. Its outputs serve the industry and the public at sector level.
Why does insurance matter for financial stability?
Insurers are large investors and absorb losses from the real economy. Large or correlated losses can transmit stress to capital markets, lenders and public budgets.
Which methods support this work?
Methods described on the STEM foundation page, including actuarial mathematics and extreme value theory and tail risk.
Insurance Nexus

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