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Assessing U.S. insurance firms' climate change impact and response

Author

Listed:
  • Aparna Gupta

    (Rensselaer Polytechnic Institute)

  • Abena Owusu

    (Montclair State University)

  • Jue Wang

    (University of Massachusetts)

Abstract

Climate change poses a serious risk for insurance firms, threatening their sustainability from numerous channels of impact. Assessing this impact, however, is not straightforward. We assess and distinguish between insurance firms by impact and response to climate change and relate the firms’ financial characteristics to climate risk exposure. A text mining approach using climate change sub-dictionaries on risk exposure, impact, and response, and a nested feature extraction method is developed to define and classify insurance firms’ adaptation levels to climate change. These features reveal that casualty insurance firms are most susceptible to acute climate risk, while life insurance firms are more prone to chronic climate risk. Insurance firms with the highest exposure to climate change present a high level of adaptation to pecuniary impact of the risk. Nevertheless, many firms with exposure remain inadequately prepared for climate change and firms with high exposure show relatively higher financial weakness.

Suggested Citation

  • Aparna Gupta & Abena Owusu & Jue Wang, 2024. "Assessing U.S. insurance firms' climate change impact and response," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 49(3), pages 571-604, July.
    • Handle: RePEc:pal:gpprii:v:49:y:2024:i:3:d:10.1057_s41288-023-00297-7
    DOI: 10.1057/s41288-023-00297-7
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    References listed on IDEAS

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