Does Climate Change Risk Impact Insurance Credit Risk? Cross Country Evidence

IF 12.5 1区管理学 Q1 BUSINESS Business Strategy and The Environment Pub Date : 2025-03-20 DOI:10.1002/bse.4252

Jassem Alokla, Panagiotis Tzouvanas, Khaldoon Albitar

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Abstract

While climate change poses a significant financial risk to the insurance industry, research has not yet examined the impact on the insurer's credit risk. This study investigates the impact of climate change risks on credit risk for insurance firms. We develop a novel climate risk measure by contrasting four key components: hydrological risks, temperature extremes, extreme weather events, and water related risks. Utilizing this comprehensive measure, we analyse a global sample of 150 insurance firms across 31 countries from 2001 to 2022. Our findings reveal a significant negative relationship between climate change risks and credit risk, measured by Z‐score, F‐score, and Altman's Z‐score. This suggests that climate risks increase the likelihood of insurance firm defaults. These findings highlight the urgency for proactive climate risk management in the financial sector, including enhanced risk assessment methodologies and adaptation strategies. This research offers valuable insights for various stakeholders in the financial sector including policy makers, credit rating agencies and investors to better understand and manage climate risk exposure in the insurance industry.

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来源期刊

Business Strategy and The Environment Multiple-

CiteScore

22.50

自引率

19.40%

发文量

336

期刊介绍： Business Strategy and the Environment (BSE) is a leading academic journal focused on business strategies for improving the natural environment. It publishes peer-reviewed research on various topics such as systems and standards, environmental performance, disclosure, eco-innovation, corporate environmental management tools, organizations and management, supply chains, circular economy, governance, green finance, industry sectors, and responses to climate change and other contemporary environmental issues. The journal aims to provide original contributions that enhance the understanding of sustainability in business. Its target audience includes academics, practitioners, business managers, and consultants. However, BSE does not accept papers on corporate social responsibility (CSR), as this topic is covered by its sibling journal Corporate Social Responsibility and Environmental Management. The journal is indexed in several databases and collections such as ABI/INFORM Collection, Agricultural & Environmental Science Database, BIOBASE, Emerald Management Reviews, GeoArchive, Environment Index, GEOBASE, INSPEC, Technology Collection, and Web of Science.