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A preliminary assessment of the impact of climate change on non-life insurance demand in the BRICS economies

Author

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  • Ranger, Nicola
  • Surminski, Swenja

Abstract

Over the past decade, the increase in insurance demand in the BRICS has been a key driver of global non-life premium growth. Current forecasts suggest that these markets will continue to be areas of significant expansion. For example, based on a simple model, we project that gross premium volumes in the BRICS economies could increase at a rate of between 5.4 and 12.3% per year over the coming decade, depending on the country. We consider how climate change may influence these trends in the period to 2030. We argue that the influence of climate change will be more multifaceted, complex and regionally variable than portrayed in the past. We suggest five pathways of influence: wealth; willingness to pay for insurance; policy and regulation; changes to the supply of insurance; and new opportunities associated with adaptation and mitigation. We conclude that, with the exception of policy and regulation, the influence of climate change on insurance demand to 2030 is likely to be small when compared with the expected growth due to rising incomes, but is not insignificant. For example, we expect the impact on premium volumes mediated through wealth to be small; less than a 0.4% adjustment in the annual growth rate to 2030. But, we also conclude that the scale of the risks and opportunities will depend partly on (re)insurer responses to the challenges of climate change. We outline five actions that could pave the way for future opportunities.

Suggested Citation

  • Ranger, Nicola & Surminski, Swenja, 2013. "A preliminary assessment of the impact of climate change on non-life insurance demand in the BRICS economies," LSE Research Online Documents on Economics 50785, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:50785
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    File URL: http://eprints.lse.ac.uk/50785/
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    Citations

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    Cited by:

    1. Sitong Yang & Shouwei Li & Xue Rui & Tianxiang Zhao, 2024. "The impact of climate risk on the asset side and liability side of the insurance industry: evidence from China," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-51, June.
    2. Liu, Bing & Yin, Weijun & Chen, Gang & Yao, Jing, 2023. "The threshold effect of climate risk and the non-linear role of climate policy uncertainty on insurance demand: Evidence from OECD countries," Finance Research Letters, Elsevier, vol. 55(PA).
    3. Christian Biener & Martin Eling & Shailee Pradhan, 2015. "Recent Research Developments Affecting Nonlife Insurance—The CAS Risk Premium Project 2013 Update," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 18(1), pages 129-141, March.
    4. Swenja Surminski & Paul Hudson, 2017. "Investigating the Risk Reduction Potential of Disaster Insurance Across Europe," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(2), pages 247-274, April.
    5. Sam Fankhauser, 2017. "Adaptation to Climate Change," Annual Review of Resource Economics, Annual Reviews, vol. 9(1), pages 209-230, October.
    6. Swenja Surminski & Paul Hudson & Jeroen Aerts & Wouter Botzen & M.Conceição Colaço & Florence Crick & Jill Eldridge & Anna Lorant & António Macedo & Reinhard Mechler & Carlos Neto & Robin Nicolai & Di, 2015. "Novel and improved insurance instruments for risk reduction," GRI Working Papers 188, Grantham Research Institute on Climate Change and the Environment.
    7. Ben Ammar, Semir & Braun, Alexander & Eling, Martin, 2015. "Alternative Risk Transfer and Insurance-Linked Securities: Trends, Challenges and New Market Opportunities," I.VW HSG Schriftenreihe, University of St.Gallen, Institute of Insurance Economics (I.VW-HSG), volume 56, number 56.

    More about this item

    Keywords

    climate change; emerging markets; insurance demand; insurance penetration;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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