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The Effect of Environmental Damage Costs on the Performance of Insurance Companies

Author

Listed:
  • Silvia Bressan

    (Department of Economics and Management, Free University of Bozen, 39100 Bozen, Italy)

  • Sabrina Du

    (The Donald J. Schneider School of Business and Economics, Saint Norbert College, De Pere, WI 54115, USA)

Abstract

We examine worldwide Property and Casualty and Life and Health insurance companies from 2004 until 2023, implementing panel regression models and mediation analyses to show that insurers raise their reserves when they face increasing costs for their potential environmental damages, ultimately reducing their profitability and underwriting capacity. Our findings extend to the insurance sector the previous evidence on banks, demonstrating that environmental damages could affect profits and solvency of financial intermediaries. These insights are important especially for insurance managers and regulators.

Suggested Citation

  • Silvia Bressan & Sabrina Du, 2024. "The Effect of Environmental Damage Costs on the Performance of Insurance Companies," Sustainability, MDPI, vol. 16(19), pages 1-17, September.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:19:p:8389-:d:1486663
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    References listed on IDEAS

    as
    1. Foster, George J, 1977. "Valuation Parameters of Property-Liability Companies," Journal of Finance, American Finance Association, vol. 32(3), pages 823-835, June.
    2. Andrew Dlugolecki, 2008. "Climate Change and the Insurance Sector," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(1), pages 71-90, January.
    3. Renbao Chen & Kie Ann Wong, 2004. "The Determinants of Financial Health of Asian Insurance Companies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(3), pages 469-499, September.
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