The impact of climate risk on the asset side and liability side of the insurance industry: evidence from China

Sitong Yang, Shouwei Li (), Xue Rui and Tianxiang Zhao
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Sitong Yang: Southeast University
Shouwei Li: Southeast University
Xue Rui: Southeast University
Tianxiang Zhao: Southeast University

Economic Change and Restructuring, 2024, vol. 57, issue 3, No 25, 51 pages

Abstract: Abstract The impact of climate risk on the insurance industry has attracted the attention of the industry and regulators. Based on data of the insurance industry in 31 provinces in China from 2005 to 2021, we use the fixed effects model to investigate the impact of climate risk on the asset side and liability side of China’s insurance industry. We find the following: First, the rise of climate risk is accompanied by the increase in the auto insurance premium share and the general life insurance premium share on the liability side, and the increase in the current assets ratio, the long-term investments ratio, and the fixed assets ratio on the asset side. Second, premium income and investment returns are two channels for the above impacts. Third, the impacts are greater in regions with catastrophe insurance pilot, lower public climate change concerns, and lower insurance payout ratios. Therefore, China’s insurance industry should optimize climate risk management on the asset and liability sides.

Keywords: Climate risk; Insurance industry; Climate change; Liability side; Asset side; Extreme weather (search for similar items in EconPapers)
JEL-codes: C23 G22 Q54 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10644-024-09700-2

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