Chinese insurers are particularly vulnerable to climate-related losses, Moody’s says

Name: China vows carbon neutrality by 2060 during one-day UN biodiversity summit
Uploaded: 2021-04-15T10:38:04.000Z
Duration: 3 min 5 s
Description: China vows carbon neutrality by 2060 during one-day UN biodiversity summit

Insurers’ earnings and capital volatility will increase because losses linked to climate change are unpredictable, rating agency says

Chinese insurance providers’ rising exposure especially to agriculture was of particular concern

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Farmers at a seedling base in Jianhe in China’s southwestern Guizhou province. Chinese insurers’ rising exposure to agriculture was of particular concern, according to Moody’s, because of increasing economic losses from floods and storms, as well as the companies’ underinsuring of this exposure. Photo: AFP

Eric Ng

Published: 6:38pm, 15 Apr 2021Updated: 6:52pm, 15 Apr 2021

Property and casualty insurers face increased volatility because of climate-related issues globally, according to Moody’s Investors Service, and Chinese insurance providers are particularly vulnerable because of their relatively low reinsurance coverage.

“Insurers’ earnings and capital volatility will increase because such losses tend to be unpredictable, and [they] are prone to mispricing risk as a result of climate change,” the rating agency said in a report published on Thursday. “Chinese insurers have lower catastrophe reinsurance coverage compared with global peers, which could exacerbate their potential capital strain.”

Reinsurance involves the transfer of risks exposure by insurers to other parties through agreements.

The report comes as countries press each other on stepping up their carbon emissions reduction goals to limit the impact of climate change. John Kerry, an US climate envoy, arrived in Beijing on Wednesday for a meeting with his Chinese counterpart, Xie Zhenhua, ahead of a climate summit of world leaders being hosted by US President Joe Biden this month.

Higher levels of decarbonisation will have implications for companies including insurers. About 27 per cent of 750 business leaders surveyed by Deloitte Touche Tohmatsu globally said the operational impact of climate-related disasters, such as damage to facilities and workforce disruption, was the biggest environmental sustainability issue already affecting or threatening their companies.

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China vows carbon neutrality by 2060 during one-day UN biodiversity summit

About 24 per cent of respondents to the poll, which was conducted in January and February this year, raised concerns about increased insurance costs or lack of availability of insurance.