Floods, droughts, storms: what is the impact of these extreme meteorological events, accentuated by climate change, on insurer ? Stress resistance test results (1) led by the Prudential Control and Resolution Authority (ACPR) which oversees banks and insurance show the significant exposure of insurance organizations to shocks related to climate change. This exercise, the second of its kind after the pilot exercise in 2020, brought together, between 2022 and 2024, 15 groups, representing 90% of the activity in France. I
They submitted three scenarios, one short-term (horizon 2027) and two long-term (horizon 2050). The latter included two consecutive episodes of severe drought in 2023 and 2024, followed in 2025 by severe flooding in the south of France in the form of a severe convective storm episode, leading to the bursting of a hydraulic dam. These events would raise awareness in the markets resulting in losses in the value of financial assets, especially brown assets (based on fossil fuels) and real estate.
Efforts continue
Results: In the short term, insurers are in more trouble from the financial shock associated with the market reaction than from the increase in claims costs associated with extreme climatic phenomena. However, it remains relatively absorbent ACPR general secretary, Nathalie Aufauvre, points out for AFP.
In the long term, on the other hand, claims and premiums for natural disasters would increase significantly in France between 2022 and 2050, with large geographic differences for drought, submergence and flood risks. The risk of non-insurance was also studied based on the assessment of the number of cancellations of insurance contracts by sector. : or due to the insurer’s decision to no longer insure the property, taking into account the increase in premiums caused by climate risk; either because of the insurer for whom the increase in costs and the frequency of climatic disasters would make it impossible to insure certain goods in certain regions. Here, too, big differences between regions can be observed. Northern Brittany and the Mediterranean coast would be the main affected areas.
Insurers must therefore continue their efforts not only in honoring the commitments made in 2019 in favor of the fight against climate change and the goal carbon neutrality by 2050, but also (…) face the expected consequences of extreme risks on their claims and on their financial assets concludes the ACPR.
Article published on May 24, 2024