Ch 13 - 15: Risks

Question 1

The types of climate risks

Answer 1

Physical climate risk
- First order effect of environmental changes e.g.
- Physical climate risk that increase mortality/morbidity of insured population
- Physical risks (e.g. floods) that affect direct property investments of insurer

Transition risk
- Economic, political and market changes as result of actions to mitigate impact of climate change e.g.
- Policy changes designed to reduce fossil fuel consumption –> investments in fossil fuels loosing value and investments in greener technologies increasing in value

Climate liability risk
- Arise from injured parties seeking compensation for impact of climate change e.g.
- A link established between air pollution and adverse health conditions resulting in new class of latent claims