Disclosure on Climate-Related Risks in the Insurance Sector: The State of the Art in Europe

In this chapter, we study climate-related risk disclosure in the European insurance sector by reviewing the literature to frame the analysis. Subsequently, we discuss climate-related risks and their disclosure in the insurance sector, and we analyze the regulatory framework, focusing on the European context. Finally, we develop an empirical analysis of 43 European insurance companies during 2016–2020. The analysis is developed in three stages. First, a new disclosure index is constructed based on the key performance indicators contained in the European Commission guidelines provided in 2019. Second, the disclosure index is used to assess the level of climate-related risk disclosure in the sample insurance companies. Finally, a rating index is constructed (using principal component analysis) to summarize the most important information content. This synthetic index possesses a greater information power as it extracts new (informative) components. Overall, the results suggest that the level of disclosure differs among European countries, and it tends to increase over time. However, the situation appears jeopardized with reference to four information areas investigated.