The Global Risks Alliance (GRA)
Climate change shifts the frequency, intensity and location of the hazards insurers cover, and nature loss removes buffers such as wetlands, mangroves and forests that once reduced damage. Together they change what is insurable, at what price and for whom. This page sets out how physical climate and nature risk reach insurance portfolios, how they are measured and stressed, and which institutions hold the decisions on capital, cover and adaptation.
Climate and nature risk · Coastal portfolio · Event scenario EV-09
Fig.Protection gap and claims surge. Design wireframe with placeholder names and illustrative values, not a record or a live system.
Climate and nature risk in insurance is the change in insured loss and insurability as climate change shifts hazards and nature loss removes buffers such as wetlands, mangroves and forests. It reaches insurers through underwriting and through their investments, and supervisors test it with climate scenarios such as those published by the NGFS.
Which places drive loss in a severe year, and how far it reaches into reinsurance. Illustrative design values.
Physical exposure and insurability. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
Warmer air and seas intensify heavy rain, heat, drought, wildfire weather and coastal flooding. Models calibrated on the past record understate risk if the baseline moves faster than they are recalibrated.
Development in floodplains, on coasts and at the wildland-urban interface raises insured values where hazard is rising. Exposure growth often contributes more to loss trends than the change in hazard itself.
Degraded wetlands, reefs, mangroves and forests stop absorbing surge, flood and fire. Nature-related risk also reaches insurers through underwriting and investment exposure to sectors that depend on ecosystems.
When expected loss and its uncertainty rise, insurers raise prices, narrow terms or withdraw. Residual market plans and public schemes absorb what remains, shifting risk from private to public balance sheets.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Physical climate risk | Financial risk from the direct effects of climate change, both acute events such as storms and floods and chronic shifts such as sea-level rise. |
| Transition risk | Financial risk from the shift to a lower-carbon economy, through policy, technology, market and reputational change. |
| Climate scenario analysis | Assessing how a portfolio would perform under a set of plausible climate and policy pathways, rather than forecasting one outcome. |
| Insurability | Whether a risk can be insured at a premium that is both adequate for the insurer and affordable for the buyer, given its size, frequency and uncertainty. |
| Nature-related risk | Risk to an organisation from its dependencies and impacts on nature, as the TNFD recommendations frame it. |
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Average annual loss under climate scenario | currency per year | per scenario | Catastrophe model with adjusted hazard | MODELLED |
| Change in exceedance probability loss | percent change against baseline | per scenario | Climate-conditioned catastrophe model | MODELLED |
| Insurer-initiated non-renewal rate | percent of policies not renewed | annual | Supervisory market conduct data | OFFICIAL |
| Residual market plan policies in force | policies | quarterly | Plan administrator reports | OFFICIAL |
| Hazard intensity at stated return period | physical unit per hazard, such as millimetres of rain | per scenario | Climate model ensembles | MODELLED |
| Climate stress test capital impact | change in solvency ratio, percentage points | per exercise | Supervisory stress tests | OFFICIAL |
| Natural buffer extent | hectares of wetland, mangrove or reef | annual | Satellite land cover | OBSERVED |
The topic as a computational graph: named sources feed the methods, an evidence review gates the outputs, and the decisions stay with the authorities that hold them.
Fig. 02Nodes carry their type, two metric rows and a state; connectors show what feeds what; dashed frames name the owners; the timeline is the cadence. Design of the pipeline, not a record of a run.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| Copernicus Climate Data Store (ERA5 and CMIP6 projections) | Reanalysis and climate projections for conditioning hazard | Free and open, attribution |
| NOAA National Centers for Environmental Information | Climate records, extremes and storm data | Public domain |
| NGFS climate scenarios | Reference transition and physical risk scenarios for supervisors | Public, attribution |
| EIOPA climate stress test and sensitivity analysis publications | Methods and aggregate results of climate exercises for European insurers | Public, EU reuse terms |
| NAIC Climate Risk Disclosure Survey responses | Insurer climate disclosures aligned with TCFD in the United States | Public |
| Global Mangrove Watch and ESA WorldCover | Extent and change of natural buffers from satellite | Free and open, attribution |
| Gallagher Re Natural Catastrophe and Climate Report | Annual review of catastrophe losses and their climate drivers | Proprietary, published report free to read |
Insurance Nexus prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Insurers and reinsurers | How climate change affects underwriting appetite, pricing, reinsurance and capital over the planning horizon | Climate-conditioned exceedance curves, ORSA scenario analysis and sensitivity to hazard and exposure assumptions |
| Insurance supervisors and central banks | How to design climate stress tests and supervisory expectations | Scenario sets, sector exposure and the methods in EIOPA, IAIS and NGFS guidance |
| Governments and residual market plans | How to respond to withdrawal: subsidies, mandates, building codes, managed retreat or public reinsurance | Availability, affordability and loss evidence by area, with the cost of each response |
| Planning and environmental authorities | Where restoring natural buffers or limiting development reduces long-term risk | Hazard reduction from natural buffers and exposure growth by zone |
Climate science has established that warming increases the likelihood of some extremes, such as heatwaves and heavy rainfall, and raises sea levels, increasing coastal flood risk. Attribution of specific events and trends varies by hazard and region, and natural variability remains large. For insurers, the consequence is that historical loss data increasingly understates current and future risk for some perils.
Insurability depends on whether risk can be estimated and priced at a level buyers can afford. In some areas, rising risk is already leading to higher premiums, reduced cover or market withdrawal. Ecosystems such as mangroves, reefs and wetlands reduce hazard impacts, so their loss increases exposure, while nature-based solutions can reduce it. Risk reduction, through building standards, land-use planning and defences, is essential to maintaining insurability.
Adjusting catastrophe models with climate projections from climate and atmospheric science.
Exploring insurability under different warming and adaptation pathways.
Assessing how ecosystem condition affects hazard and exposure, drawing on Biodiversity Nexus at The Global Centre for Risk and Innovation (GCRI).
Climate projections are uncertain at local scales, adaptation responses are hard to predict, and links between nature and losses are still being quantified.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.