Property insurance demand in response to climate risk: The role of green finance, economic policy uncertainty, and non-linearity

Climate change leads to frequent disasters and severe economic and property damage. Concurrently, property insurance claims services are becoming increasingly prominent. By employing several panel data models, this study investigates the effect of climate risk on property insurance demand from 2011 to 2020 for 286 Chinese cities. The results show that climate risk positively promotes property insurance demand, with heterogeneous effects by region and urban agglomeration. Crucially, the findings remain robust under various alternative approaches. Furthermore, considering the fluctuations in economic and climate policies, the macro uncertainty channel reveals that climate and economic policy uncertainties play mediating and moderating roles, respectively. Regarding financial instruments, green finance has complementary effects on climate risk and increases property insurance demands. Given the complexity and externality of climate change, the impact of climate risk on property insurance demand exhibits a non-linear “inverted U-shape.” Our findings provide valuable theoretical and practical insights for policymakers and insurance managers. Policymakers should maintain the longterm, stable, and consistent nature of their policies, and develop reasonable regional climate subsidy policies. Insurers should establish cooperation with the government to strengthen climate monitoring and innovation in climate insurance.