Skip to main content

Thank you for visiting nature.com. You are using a browser version with limited support for CSS. To obtain the best experience, we recommend you use a more up to date browser (or turn off compatibility mode in Internet Explorer). In the meantime, to ensure continued support, we are displaying the site without styles and JavaScript.

  • Comment
  • Published:

Normative approach to risk management for insurers

Nature Climate Change volume 11, pages 460–463 (2021)Cite this article

Subjects

Private insurance is a key component of strategies to manage physical climate change impacts, but existing scenarios used by insurers are not well suited to making business decisions. We call for a complementary normative approach, based on business objectives, that delivers actionable information to decision-makers.

This is a preview of subscription content, access via your institution

Access options

Buy this article

  • Purchase on Springer Link
  • Instant access to full article PDF
Buy now

Prices may be subject to local taxes which are calculated during checkout

Fig. 1: Schematic of the probability of exceeding a pre-defined impact threshold evolving over time under climate change.
Fig. 2: Visualizing impact threshold metrics.

References

  1. Herring, S. C., Christidis, N., Hoell, A., Hoerling, M. P. & Stott, P. A. B. Am. Meteor. Soc. 102, S1–S116 (2021).

    Article  Google Scholar 

  2. Golnaraghi, M. Climate Change and the Insurance Industry: Taking Action as Risk Managers and Investors (The Geneva Association, 2018).

  3. Physical Risk Framework: Understanding the Impacts of Climate Change on Real Estate Lending and Investment Portfolios (Cambridge Institute for Sustainability Leadership, 2019).

  4. Global Facility for Disaster Reduction and Recovery. Financial Protection Against Disasters (World Bank, 2014).

  5. General Insurance Stress Test 2019 (Prudential Regulatory Authority, 2019).

  6. Grenier, R. R., Sousounis, P., Schneyer, J. & Raizman, D. Quantifying the Impact from Climate Change on US Hurricane Risk (AIR Worldwide Corporation, 2020).

  7. Babovic, F., Sassi, M. & Castéran, A. European flood and climate change: examining the potential impact on insured losses. Risk Management Solutions https://bit.ly/3udiDCW (2020).

  8. Insuring the Climate Transition (United Nations Environment Programme, 2021).

  9. Mitchell-Wallace, K., Jones, M., Hillier, J. & Foote, M. Natural Catastrophe Risk Management and Modelling: A Practitioner’s Guide (John Wiley & Sons, 2017).

  10. Golnaraghi, M. et al. Managing Physical Climate Risk: Leveraging Innovations in Catastrophe Risk Modelling (Geneva Association, 2018).

  11. Recommendations of the Task Force on Climate-related Financial Disclosures (Task Force on Climate-related Financial Disclosures, 2017).

  12. A Framework for Assessing Financial Impacts of Physical Climate Change (Prudential Regulatory Authority, 2019).

  13. Guide to Climate Scenario Analysis for Central Banks and Supervisors (Network for Greening the Financial System, 2020).

  14. Strong, K., Carpenter, O. & Ralph, D. Scenario Best Practices: Developing Scenarios for the Insurance Industry (Cambridge Centre for Risk Studies and Lighthill Risk Network, 2020).

  15. Realistic Disaster Scenarios (RDS). Lloyds https://www.lloyds.com/market-resources/underwriting/realistic-disaster-scenarios-rds (2021).

  16. Jones, R. N. Nat. Hazards 23, 197–230 (2001).

    Article  Google Scholar 

  17. King, D., Schrag, D., Dadi, Z., Ye, Q. & Ghosh, A. Climate Change: A Risk Assessment (Centre for Science and Policy, Cambridge University, 2017).

  18. Weaver, C. P. et al. Environ. Res. Lett. 12, 8 (2017).

    Google Scholar 

  19. Sharpe, S. Geoscience Communication 2, 95–100 (2019).

    Article  Google Scholar 

  20. Fiedler, T. et al. Nat. Clim. Change 11, 87–94 (2021).

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. MS Amlin, The Leadenhall Building, London, UK

    Cameron J. Rye & Andrew Mitchell

Authors
  1. Cameron J. Rye
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Jessica A. Boyd
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Andrew Mitchell
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Cameron J. Rye.

Ethics declarations

Competing interests

C.J.R., J.A.B. and A.M. are employees of MS Amlin — a global speciality insurer and reinsurer that is part of the MS&AD Insurance Group. C.J.R., J.A.B. and A.M. have contributed to this commentary in their own capacity; any views expressed in this Comment are their own and not those of MS Amlin or MS&AD.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Rye, C.J., Boyd, J.A. & Mitchell, A. Normative approach to risk management for insurers. Nat. Clim. Chang. 11, 460–463 (2021). https://doi.org/10.1038/s41558-021-01031-8

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1038/s41558-021-01031-8

Search

Advanced search

Quick links

Nature Briefing

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

Get the most important science stories of the day, free in your inbox. Sign up for Nature Briefing