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The impact of climate risk on the asset side and liability side of the insurance industry: evidence from China

Author

Listed:
  • Sitong Yang

    (Southeast University)

  • Shouwei Li

    (Southeast University
    Southeast University)

  • Xue Rui

    (Southeast University)

  • Tianxiang Zhao

    (Southeast University)

Abstract

The impact of climate risk on the insurance industry has attracted the attention of the industry and regulators. Based on data of the insurance industry in 31 provinces in China from 2005 to 2021, we use the fixed effects model to investigate the impact of climate risk on the asset side and liability side of China’s insurance industry. We find the following: First, the rise of climate risk is accompanied by the increase in the auto insurance premium share and the general life insurance premium share on the liability side, and the increase in the current assets ratio, the long-term investments ratio, and the fixed assets ratio on the asset side. Second, premium income and investment returns are two channels for the above impacts. Third, the impacts are greater in regions with catastrophe insurance pilot, lower public climate change concerns, and lower insurance payout ratios. Therefore, China’s insurance industry should optimize climate risk management on the asset and liability sides.

Suggested Citation

  • Sitong Yang & Shouwei Li & Xue Rui & Tianxiang Zhao, 2024. "The impact of climate risk on the asset side and liability side of the insurance industry: evidence from China," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-51, June.
    • Handle: RePEc:kap:ecopln:v:57:y:2024:i:3:d:10.1007_s10644-024-09700-2
    DOI: 10.1007/s10644-024-09700-2
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    More about this item

    Keywords

    Climate risk; Insurance industry; Climate change; Liability side; Asset side; Extreme weather;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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