Building Economic Resilience to the Health Impacts of Climate Change 2025

Insurers face key challenges at the intersection of climate change and public health. By offering innovative, comprehensive and cost-effective coverage, they can address these challenges and unlock growth opportunities. –Climate risks are driving demand for innovative insurance solutions. In recent years, there has been a rapid expansion of climate-health insurance offerings. Additionally, insurers are working to incentivize proactive and preventative action. Providers who offer these policies are capturing an emerging market and building stronger relationships with consumers. –Worsening climate-health risks are prompting customers to seek more comprehensive, tailored coverage. A Swiss Re Institute survey found that 40% of respondents were concerned about the adequacy of their existing coverage.79 Leading insurers are broadening traditional health and life policies to address climate-driven conditions, with many offering coverage extensions for illnesses that are becoming more prevalent due to climate change. This approach can serve as a competitive differentiator. –Harnessing advanced data and analytics to price coverage for climate-health risks more accurately can be a competitive advantage for insurers. Traditional actuarial models are not equipped to predict the non-linear, evolving nature of climate impacts on health. This has led to a surge in demand from insurers for improved data and risk assessment tools to reduce risk. This is an attractive opportunity for reinsurers, who can offer their advanced risk-modelling capacities and data to support insurance clients.Despite new opportunities, rising and unpredictable claim volumes driven by climate- health risks threaten the fundamentals of the insurance business model. Rising volume of claims: More frequent and severe climate events are driving up insurance claims across health, life and casualty lines. As climate-related shocks intensify, payouts will continue to climb, which could erode profitability if premiums and reserves do not keep pace. Moreover, a single extreme event can trigger many claims at once, undermining the traditional risk-pooling model. Insurers may have to raise premiums and hold more capital to cover these correlated losses, further driving up costs for consumers. Unpredictable trend of claims: Climate volatility makes it increasingly difficult for insurers to predict future losses, define project capital allocation requirements and manage reserves effectively. Historical data are unable to predict future losses. Instead, forward-looking models are required that translate climate science into claims projections. Life and health insurers can take cues from the property insurance sector, where forward-looking climate scenarios are used to stress test risk exposure. When it comes to climate-health risks, however, developing truly reliable forecasting tools may take years. Further capital investment will be required to develop the risk management capabilities needed to monitor and predict complex climate phenomena and avoid unforeseen costs. This evolution will be partly driven by regulators, who are increasingly pushing insurers to extend climate stress testing beyond property portfolios to include life and health lines. 6.3 Economic impact Despite new opportunities, rising and unpredictable claim volumes driven by climate-health risks threaten the fundamentals of the insurance business model. Building Economic Resilience to the Health Impacts of Climate Change 37