The science behind global warming and the role of greenhouse gases is clear. However, the future is difficult to predict given the wide range of potential outcomes associated with the many variables and varying emissions pathways. At the more extreme end the consequences are potentially huge, with society likely to face transformational change across all scenarios. This makes climate change risk unusually broad in nature and one many regard as the greatest facing humanity.

Failure to act now has repercussions for the whole of society. Ultimately the key to resilience is to limit future warming by reducing emissions and adapting. Transition risk needs to be taken now to avoid the huge physical risk in the future. A massive and globally coordinated response is required, as highlighted by the IPCC (Intergovernmental Panel on Climate Change), driven by radical economic and socioeconomic change. Insurers want to play their part, preparing themselves and working with society to help everyone ready themselves for the physical and transition risks ahead.

The intention of this position paper is to provide insurance sector risk professionals, and wider stakeholders, with a clear understanding of climate change implications for the insurance industry, both from an underwriting and investment perspective, and to equip them to challenge their businesses and clients in their responses to climate change. The paper aims to navigate the main issues, and provide a clear and up-to-date view of the climate change challenge, centred around the potential impacts on the insurance sector.

The time to act is upon us. The climate is changing and ‘the heat is on’.


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