The Effect of Environmental Damage Costs on the Performance of Insurance Companies

Silvia Bressan and Sabrina Du
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Sabrina Du: The Donald J. Schneider School of Business and Economics, Saint Norbert College, De Pere, WI 54115, USA

Sustainability, 2024, vol. 16, issue 19, 1-17

Abstract: We examine worldwide Property and Casualty and Life and Health insurance companies from 2004 until 2023, implementing panel regression models and mediation analyses to show that insurers raise their reserves when they face increasing costs for their potential environmental damages, ultimately reducing their profitability and underwriting capacity. Our findings extend to the insurance sector the previous evidence on banks, demonstrating that environmental damages could affect profits and solvency of financial intermediaries. These insights are important especially for insurance managers and regulators.

Keywords: insurance companies; environmental damages; environmental damage costs; environmental impact ratios; profitability; leverage (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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