Climate change is increasingly exposing communities and economies to severe weather events, making insurance a crucial tool for risk management and resilience. Recent floods in Germany caused €35 billion in damages, while the United States experienced over $800 billion in climate-related losses between 2010 and 2019, including wildfires in California costing more than $24 billion in 2018. Projections suggest that climate-related damages could reach €900 billion by 2050,
underscoring the urgency of developing effective insurance solutions.

Insurers face significant challenges in this context. Making premiums and risk affordable is difficult due to the unpredictability and severity of extreme weather events notably whenever attenuation investments lags. Moral hazard is also a concern, as insured parties and governments may take undue risks assuming coverage, making proactive risk management strategies essential. In developing countries, coverage gaps for brown assets can hinder economic development and eventually the transition to low-carbon energy sources.

The private insurance market alone may not be sufficient to address these risks. Careful market analysis is needed to determine where private solutions are viable, and where public-private collaboration is required to ensure a robust and sustainable insurance ecosystem. Striking a balance between risk management, financial sustainability, and affordability is central to building resilience.

Governments play a key role by creating enabling regulatory frameworks, supporting risk assessment, encouraging adaptation and mitigation measures, and providing targeted financial support. Insurers also need to engage in advanced risk modelling, data-sharing initiatives, and preventive strategies embedded in
product design and underwriting processes to enhance coverage and reduce losses.

Together, coordinated action by governments and insurers is essential to develop a resilient insurance infrastructure capable of protecting communities, supporting economic stability, and enabling a sustainable transition in the face of growing climate risks.”