Insurance carriers face climate risk on two fronts simultaneously -- as underwriters of climate-exposed property and as investors holding assets subject to transition and physical risk -- and regulators are demanding more transparency about both.
The disclosure frameworks emerging from the NAIC, SEC, and international bodies require carriers to quantify and communicate their climate risk exposure in ways that most organizations are still building the analytical infrastructure to support. Scenario analysis, which asks carriers to project outcomes under various climate trajectories, is particularly demanding for organizations whose models were not designed with that framework in mind.
The underwriting and investment dimensions of climate risk are also not always managed in a coordinated way. A carrier reducing its property exposure in coastal markets while simultaneously holding significant investment positions in real estate or fossil fuel energy creates a mismatch that sophisticated stakeholders will notice.
The carriers making the most progress on climate risk strategy are those that have assigned clear organizational ownership for climate across underwriting, investment, and enterprise risk management -- and connected the analysis across all three.
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