Insurance in a Changing Climate: A Retrospective Study of Water-Related Claims and Pricing Strategies in Norway

Yue Shi (), Geir Drage Berentsen () and Håkon Otneim
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Yue Shi: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/faculty/yue-shi/
Geir Drage Berentsen: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/faculty/geir-drage-berentsen/

No 2025/3, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: Climate change has posed significant challenges to socioeconomic systems across the world, with the insurance industry at the forefront of facing climate risks. Recognizing the growing importance of climate risk management in insurance practices, this study investigates the impact of weather events on water-related home insurance claims by utilizing a unique dataset from a leading Norwegian insurance company. We propose an effective statistical model to address the zero-inflation and over-dispersion inherent in claim count data and introduce a retrospective approach to reconstruct historical claim profiles leveraging high-resolution weather data. Our results reveal geographical variations in weather-related risks for home insurance in two largest Norwegian cities and identify seasonal patterns in insurance claims. Furthermore, we evaluate both reactive and proactive pricing strategies based on the retrospective analysis, providing actionable insights for insurers to adjust premiums in response to evolving climate risks. This research offers a robust framework for integrating weather data into actuarial modeling and contributes to the adaptation of the insurance industry to a changing climate.

Keywords: Climate risk; weather-related insurance claims; retrospective study; premium pricing (search for similar items in EconPapers)
JEL-codes: C34 C40 G22 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2025-01-31
New Economics Papers: this item is included in nep-agr and nep-env
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