Analysis of the Relationship Between Extreme Weather Disasters and Property Insurance Solvency Under Global Climate Change

Frequent extreme weather events have caused substantial loss of life and property. The causal relationship between ‘’extreme weather risk – catastrophic loss – high claim ratio – insurer solvency’’ has become a critical focus in the analysis of the financial vulnerability of insurance companies. However, there is a lack of research literature on the relation among extreme weather risk, catastrophic loss and insurer solvency, with most studies being quantitative analyses of pairwise relationships, and few exploring the mechanisms among all three factors. This paper focuses on the relationship between extreme weather disasters and property insurance claim ratios. Using 10 years of meteorological data and claim data from property insurance companies (2012–2021) across 30 provinces in China, the study constructs indices for three types of extreme weather—high temperature, low temperature, and heavy precipitation—along with the associated claim ratios, volatility, and a panel regression model of mediation effects. The analysis reveals a positive correlation between extreme weather disasters and property insurance claim ratios. Additionally, over 3-year and 5-year windows, the three extreme weather indices significantly increase claim ratios, leading to a complete or partial mediation effects on the solvency of property insurance companies.