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Open Access Publications from the University of California

U.S. insurance industry perspectives on global climate change


The insurance industry stands to be impacted by global climate change, and also has considerable opportunity for participating in mitigation and adaptation. Weather-related events touch almost all types of insurance providers, although the degree of vulnerability varies substantially. U.S. insurers currently pay 60% of global losses from weather-related natural catastrophes, and these types of losses are expected to rise as a result of climate change. The effects of increased losses can lead to upward pressure on insurance reserves and prices, the sensitivity of insurers' stock prices to major weather-related events, and an increasing number of insolvencies. This study found that the industry is particularly vulnerable to climate change, yet firms have assumed positions on all points of the public policy compass and a range of barriers serve to impede their involvement in the issue. The fact that insurers transfer such risks to consumers, the capital markets, and the government sector represents an important public policy issue if such risks rise in the future. The continued insurability of such risks is a central question, especially given that most experts project increases in extreme events going forward.

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