Ortec Finance has published its 2025 update on climate risk for the European insurance industry, following the release of its inaugural assessment last year.
The update applies the firm’s latest climate scenarios to assess the financial consequences of climate change for European insurers and is aimed at the global institutional investment community, including CIOs, directors, actuaries and investment teams.
The assessment uses a multi-asset class, top-down scenario approach to translate climate developments into financial impacts on insurers’ liabilities, investment portfolios and balance sheets.
According to the findings, climate change is shaping the macroeconomic environment faced by the European insurance industry. It also highlights rising physical climate risks as a factor affecting insurability. Increasing claims and inflation are contributing to higher policy payouts and premiums, creating challenges for maintaining affordable insurance coverage.
Climate transition scenarios are also examined. While these scenarios involve steeper short-term drawdowns, they are associated with more favourable long-term macroeconomic conditions, helping to support premium affordability and stabilise policy payouts over time.
Geographical exposure is identified as an important factor, with differences in the location of assets and liabilities influencing how physical risks impact insurers’ balance sheets. The report also notes that climate change affects insurance lines differently, with property and casualty insurers more exposed through liabilities, while life insurers are more sensitive to macroeconomic conditions.
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