Failure to manage climate risks could affect insurers’ financial ratings

Property/casualty insurers’ financial strength ratings may come under pressure if they fail to properly manage climate change risks, DBRS Morningstar said Wednesday.

The Toronto-based credit rating agency said in a note that, to date, it has not revised any property/casualty insurer’s rating, or trend, specifically because of climate change risk.

However, insurers’ ability to manage climate risk continues to factor into many components of its credit risk analysis, such as risk profile, earnings ability, liquidity, capitalization and, to a lesser degree, franchise strength, DBRS Morningstar said.

Property insurance premiums have been consistently increasing in all parts of the world since 2019, according to the note. “This trend is expected to continue, driven at least in part by the changing climate,” it said.