Document Type : English paper for special issue on "climate change & insurance industry"

Authors

• Mohammadreza Farzaneh ¹
• Faezeh Banimostafa Arab ²

¹ Assistant Prof. at Research Group of Environmental Engineering and Pollution Monitoring, Research Center for Environment and Sustainable Development, RCESD, Department of Environment, Tehran, Iran

² Mathematical Science and Computer, Mathematical Science and Computer, Allameh Tabataba'i, Tehran, Iran

Abstract

METHODS: The study used a three-level analytical approach to examine both theoretical and practical aspects of integrating insurance into climate governance. Level I employed Ostrom’s SES framework to design a conceptual model featuring governance structure and six subsystems: economy-wide, public sector, finance, rural, urban, and social development. The conceptual model helped identify how insurance could facilitate risk management, resource allocation, and adaptation. The dataset was gathered from comprehensive global sources, such as Climate Change Laws of the World, which originally yielded 931 policies in developed countries and 1,321 policies in developing countries, 499 and 429 relevant laws, and 1,520 and 1,015 targets, respectively. Level II consisted of international comparison studies. It used the conceptual model to analyze specific case studies to examine policies, laws, and targets related to insurance, identifying trends and approaches to tailor insurance for climate change adaptation. Level III involved expert feedback gathered using a semi-structured questionnaire sent to 181 professionals, who identified priorities concerning subsystems in governance and provided expertise on climate change, insurance capability, and executing innovative interventions. The methodology combined theoretical foundations, objective evidence, and expert input, which helped localize and globalize efforts to design a conceptual model on climate change.
FINDINGS: The conceptual framework placed insurance at the forefront of connectivity within the finance system, facilitating risk transfer and supporting adaptation. Examples across the globe demonstrated that insurance acted as a tool rather than merely a buffer. For instance, Norway’s Natural Damage Insurance Act (1989) required a mandatory pooling mechanism after disasters and provided post-event recovery measures. Flood Re in the UK, launched in 2014, demonstrated how a holistic approach could ensure affordable flood insurance. France, Spain, and Argentina illustrated how comprehensive risk management supported agricultural, land-use change, and forestry programs. National targets in Turkey and Kyrgyzstan showed how policy commitments could be operationalized through insurance platforms to enhance resilience. Experts ranked priorities, emphasizing immediate attention to urban and rural zones, while finance received less priority due to perceived limited immediacy, although its value remained significant. Challenges included lack of climate information, limited access to relevant hazards, poor understanding of insurance project assumptions, underdeveloped reinsurance markets, insufficient eco-insurance options, and limited financing opportunities such as publicly-supported bonds and eco-subsidization programs. Experts recommended greater focus on parametric insurance programs, expanded data pools, more comprehensive mapping, and increased access to innovative financing options. These recommendations highlighted insurance’s role in connecting finance and climate management across multiple governance domain.
CONCLUSION: Insurance presented considerable opportunities as a strategic tool for adaptation, mitigation, and DRM in the context of climate change. Successful integration required filling gaps in climate and risk information, designing relevant climate modeling processes, developing insurance products on sectoral and geographic bases, and incorporating available finance options within overall governance systems. Policymakers and stakeholders could achieve optimal results by implementing short-term, localized approaches to complement long-term modifications within finance and insurance systems. This study demonstrated the strategic positioning of insurance to function proactively, rather than solely reactively, within climate change governance processes.

Keywords

• Climate Governance
• Conceptual Framework
• Finance
• Insurance
• Risk Management
• Social-Ecological Systems

Main Subjects

• Risk management in the insurance industry