Climate risk
Climate change is a source of financial risk, impacting the resilience of individual insurers as well as global financial stability. While insurers are exposed to both transition and physical risks through their underwriting and investment activities, they can also be key agents in identifying, mitigating and managing climate risk, thereby contributing to a sustainable transition to net-zero.
Therefore, climate change is a strategic theme within the IAIS Strategic Plan. The IAIS’ work on climate change spans across many activities such as financial stability risk assessment, supervisory and supporting material and capacity building.
Financial stability
The Global Monitoring Exercise (GME) allows the IAIS to monitor and assess global insurance market trends and developments and their potential impact on insurance markets and global financial stability. In 2021, the IAIS published a special topic edition of the Global Insurance Market Report (GIMAR) on the insurance sector’ investment exposures to climate-related risks. This report provided the first quantitative global study on the impact of climate change on the insurance sector.
Since then, climate risk data elements have become a regular feature of the IAIS’ GME and provide a global baseline of climate risk data for the insurance sector. The outcomes of the analysis are published annually as part of the regular GIMAR. In late 2025, the IAIS will publish a GIMAR special topic edition on financial stability implications of natural catestrophe protection gaps.
Standard setting and supervisory practices
The IAIS is focused on promoting a globally consistent supervisory response to climate change and providing supervisors with the necessary tools to monitor, assess and address climate-related risks to the insurance sector.
Recent and upcoming events
- 28 April 2025, The IAIS held a public webinar to discuss the Application Paper on 28 April 2025 at 13:00-14:30 CEST. More information
Related
documents
- November 2023 – A call to action: the role of insurance supervisors in addressing natural catastrophe protection gaps
- August 2022 – IAIS response to ISSB climate exposure draft
- Oct 2021 – IAIS Public statement on climate
- July 2021 – Launch of the Climate Training Alliance
- Dec 2020 – IAIS Environmental Policy
In December 2024 the IAIS made limited updates to certain guidance paragraphs in the Insurance Core Principles (ICPs) related to investments and enterprise risk management to integrate climate risk into the ICPs. The ICP Introduction was also updated to position the response to climate risk within the global framework for insurance supervision.
The IAIS published an Application Paper on the supervision of climate-related risks in the insurance sector in April 2025. The paper was developed over a two-year period following four consultations and extensive member and stakeholder engagement. This comprehensive paper will support supervisors in effectively integrating climate-related risk into their supervisory practices, thereby strengthening the resilience of the global insurance sector. The paper replaces the previous paper from May 2021.
The Application Paper outlines good practices and guidance for supervisors on several areas, including:
- The role of supervisors in assessing climate-related risks
- Integration of climate-related risk into supervisory frameworks with respect to corporate governance, risk management and internal controls
- The impact of climate-related risk on valuation and investment practices
- Supervisory reporting, public disclosure and macroprudential supervision of climate-related risks
- Group supervisory issues
- The role of climate-related risk scenario analysis and important considerations for the impact of climate-related risk on market conduct.
Capacity building
Climate Training Alliance
The IAIS is proud to be one of the founding partners of the Climate Training Alliance (CTA), a dedicated online portal for training on climate risks for central banks and supervisors. The CTA is a collaboration between the Bank for International Settlements, the IAIS, the Central Banks and Supervisors Network for Greening the Financial System (NGFS) and the UNDP Sustainable Insurance Forum (SIF). IAIS members have free access to all the climate risk trainings, including those based on IAIS supervisory and supporting materials. For instance, it includes a dedicated training programme on climate scenario analysis.
Natural Catastrophes Assessment Tool
One of the main effects of climate change on insurers is through the expected increase in natural catastrophes (NatCat)-related claims. To assess the potential risks associated with this trend, as a first step, supervisors need to have the data and tools to understand and monitor insurers’ current exposure to NatCat. As a second step, supervisors need to consider how climate change, in conjunction with other relevant developments (such as an increase in exposure in high-risk areas and possible adaptation actions), may impact the cost of NatCat coverage in the medium to long term.
To help supervisors assess the potential materiality of NatCat risks and how climate change may impact them, the IAIS commissioned CLIMADA Technologies to develop a tool based on CLIMADA, an open source global NatCat model covering the key climate-related insurance NatCat perils. This tool provides IAIS members with estimates of the NatCat damages at different return periods at a country and US state level, as well as average annual loss (AAL) across more than 250 individual territories using the LitPop global high-resolution asset exposure dataset. In addition, the tool provides estimates about how climate change may impact the above metrics by 2030, 2050 and 2080 under Representative Concentration Pathways (RCP) 8.5 (the pathway with the highest assumed greenhouse gas emissions) and based on unchanged exposure.
IAIS members have free and unlimited access to the tool and are encouraged to reach out to Miroslav Petkov for further information.
Partners
The IAIS works closely with various partners in addressing the risks and opportunities from climate change. Since its inception in 2017, the SIF has been a key strategic partner.
The IAIS also collaborates with other international organisations and standard setting bodies on climate risk issues, including the Financial Stability Board (FSB) and the NGFS.