نوع مقاله : مقاله انگلیسی برای ویژه‌نامه "تغییر اقلیم و صنعت بیمه"

نویسندگان

• Mahmoud Asad Samani ¹
• Sahar Haghnazari ²

¹ Chief Risk Officer of Iran Insurance Company

² Pasargad Insurance Company Expert

چکیده

BACKGROUND AND OBJECTIVES: Climate change, as a systemic risk, has posed unprecedented challenges to the foundations of the insurance industry. As the global environment undergoes rapid transformations, the historical predictability of risks is being fundamentally undermined. This study aims to examine the bidirectional impacts of climate change include physical (climate-related) and transitional (policy and market-driven) risks, on the insurance sector. The scope of this research covers how these risks manifest in financial statements and operational strategies of insurance firms. Globally, the insurance industry is undergoing a fundamental transformation in response to climate change, with insurers increasingly recognizing it as a material financial and strategic risk. This recognition is driving a shift toward more sophisticated climate-risk disclosure and internal stress testing. However, responses remain uneven across insurance territories, and practical adaptation is often limited to pricing and reinsurance adjustments rather than long-term resilience planning. Many markets still struggle to integrate forward-looking climate projections into their core business models. In Iran, similar challenges persist. The regional climatic volatility adds a layer of complexity to the domestic financial landscape. On one hand, the country is prone to a diverse range of natural disasters, predominantly earthquakes and floods. These events often lead to catastrophic socio-economic consequences due to the lack of adequate coverage. On the other hand, the insurance market still relies on traditional products and pricing models with no effective and specialized climate risk management framework. This institutional inertia creates a widening protection gap that threatens national economic stability.
METHODS: Using a descriptive–analytical approach, this study examines both physical and transitional risks associated with climate change and their implications for the insurance industry. The research methodology involves a deep dive into existing literature and industry reports to identify emerging patterns of risk and vulnerability. The analysis also draws upon key international regulatory and supervisory frameworks, including the Task Force on Climate-related Financial Disclosures (TCFD) and the Network for Greening the Financial System (NGFS) to assess how strategic adaptation and innovation can enhance the resilience and sustainability of the insurance sector. By evaluating these global benchmarks, the methodology seeks to establish a bridge between international best practices and the specific regulatory environment of Iran. The study further utilizes comparative analysis to demonstrate how global adaptation trends can be contextualized within the Iranian insurance market to mitigate future financial shocks.
FINDINGS: Economic losses from natural catastrophes reached USD 318 billion with 14,000 victims in 2024, denoting that 57% of the global losses were uninsured. This statistic highlights a critical vulnerability in the global financial safety net. These are up from USD 303 billion in 2023 and exceed the 10-year average of USD 254 billion. Such a persistent upward trend confirms that climate-induced volatility is becoming the new normal. Findings reveal that the sharp increase in natural disaster losses has rendered the insurers’ traditional risk pricing and management models ineffective. Traditional actuarial methods, which depend heavily on historical frequency and severity, are no longer sufficient to capture the non-linear risks associated with a warming planet. Climate change is an enabler for insurers indeed as it can add new business opportunities such as green and parametric products to their portfolios as well. The findings suggest that by developing innovative solutions like weather-index insurance and renewable energy coverage, insurers can capture new markets while supporting environmental goals. Furthermore, the analysis shows that investment in digital transformation and catastrophe modeling is essential for maintaining solvency in an increasingly uncertain environment.
CONCLUSION: By examining both physical and transitional risks and their diverse impacts on the insurance sector, this study recommends a conceptual framework to illustrate the paradigm shift and explores how the insurance industry can evolve from a passive role as a claims payer to an active, leading role in climate risk management and in facilitating the transition toward a sustainable economy. This evolution requires a fundamental rethinking of the insurer-policyholder relationship. It is expected that the insurance mechanism should facilitate and incentivize preventive actions too. By rewarding risk-reduction behaviors through premium discounts or specialized advisory services, insurers can reduce overall losses. The study concludes that strategic adaptation and investment in innovation are not only necessary for survival but also essential for the long-term sustainability of Iran’s insurance industry. Without a proactive approach, the domestic market may face severe capacity constraints and increased capital volatility. Hence, a number of strategic approaches are suggested to cope with this situation. These include the establishment of a national climate-risk database, the promotion of public-private partnerships for catastrophe insurance, and the adoption of ESG (Environmental, Social, and Governance) criteria in insurance investment portfolios. By implementing these strategies, the industry can secure its future while contributing to national climate resilience.

کلیدواژه‌ها

• Green insurance
• Climate change
• NGFS
• Parametric insurance
• Physical risk
• TCFD
• Transitional risk

موضوعات

• مدیریت ریسک در صنعت بیمه

عنوان مقاله [English]

Climate risk management and the need for a paradigm shift in Iran’s insurance industry

نویسندگان [English]

• Mahmoud Asad Samani ¹
• Sahar Haghnazari ²

¹ Chief Risk Officer of Iran Insurance Company

² Pasargad Insurance Company Expert

چکیده [English]

BACKGROUND AND OBJECTIVES: Climate change, as a systemic risk, has posed unprecedented challenges to the foundations of the insurance industry. This study aims to examine the bidirectional impacts of climate change include physical (climate-related) and transitional (policy and market-driven) risks, on the insurance sector. Globally, the insurance industry is undergoing a fundamental transformation in response to climate change, with insurers increasingly recognizing it as a material financial and strategic risk. However, responses remain uneven across insurance territories, and practical adaptation is often limited to pricing and reinsurance adjustments rather than long-term resilience planning. In Iran, similar challenges persist. On one hand, the country is prone to a diverse range of natural disasters, predominantly earthquakes and floods. On the other hand, the insurance market still relies on traditional products and pricing models with no effective and specialized climate risk management framework. These dynamics highlight the urgency of adopting forward-looking methodologies that move beyond historical averages and incorporate scenario-based analyses. Moreover, understanding these dual impacts provides a foundation for articulating a comprehensive framework tailored to the structural, regulatory, and market-specific conditions of Iran’s insurance industry. These considerations underscore that without integrating climate science, forward-looking analytics, and adaptive governance structures, insurers will increasingly face solvency pressures and declining risk-bearing capacity. Consequently, redefining strategic priorities has become a prerequisite rather than an option. METHODS: Using a descriptive–analytical approach, this study examines both physical and transitional risks associated with climate change and their implications for the insurance industry. The analysis also draws upon key international regulatory and supervisory frameworks, including the Task Force on Climate-related Financial Disclosures (TCFD) and the Network for Greening the Financial System (NGFS) to assess how strategic adaptation and innovation can enhance the resilience and sustainability of the insurance sector. This methodological approach allows the research to integrate empirical insights with global best practices, thereby ensuring both analytical rigor and contextual relevance. Additionally, the comparative review of established international frameworks provides a benchmark for identifying existing gaps and priority areas for reform within Iran’s insurance ecosystem. The combined use of qualitative assessment and international benchmarks also strengthens the validity of the study’s conclusions, allowing a clearer interpretation of how climate risk frameworks can be operationalized within emerging insurance markets. FINDINGS: Economic losses from natural catastrophes reached USD 318 billion with 14,000 victims in 2024, denoting that 57% of the global losses were uninsured. These are up from USD 303 billion in 2023 and exceed the 10-year average of USD 254 billion. Findings reveal that the sharp increase in natural disaster losses has rendered the insurers’ traditional risk pricing and management models ineffective. Climate change is an enabler for insurers indeed as it can add new business opportunities such as green and parametric products to their portfolios as well. The evidence also indicates widening protection gaps in several regions, demonstrating the limitations of conventional indemnity-based mechanisms. Furthermore, the emergence of new climate-aligned market segments suggests that innovation capacity will increasingly determine the competitiveness and solvency outlook of insurers, particularly in climate-exposed economies. Moreover, the results highlight that insufficient diversification benefits and rising loss correlations further challenge traditional assumptions, reinforcing the necessity for insurers to adopt adaptive and technology-enabled risk management approaches. CONCLUSION: By examining both physical and transitional risks and their diverse impacts on the insurance sector, this study recommends a conceptual framework to illustrate the paradigm shift and explores how the insurance industry can evolve from a passive role as a claims payer to an active, leading role in climate risk management and in facilitating the transition toward a sustainable economy. It is expected that the insurance mechanism should facilitate and incentivize preventive actions too. The study concludes that strategic adaptation and investment in innovation are not only necessary for survival but also essential for the long-term sustainability of Iran’s insurance industry. Hence, a number of strategic approaches are suggested to cope with this situation. Ultimately, strengthening the industry’s analytical capabilities and aligning national practices with global climate-related standards will be essential for achieving this transformation. The proposed framework underscores that proactive engagement, cross-sector cooperation, and innovation-driven policies can significantly enhance the sector’s contribution to national climate resilience. In this context, the study emphasizes that coordinated regulatory reforms, sustained investment in data infrastructure, and capacity-building initiatives will be crucial for enabling a smooth transition toward a resilient, innovation-driven insurance sector.

کلیدواژه‌ها [English]

• Parametric insurance
• Green insurance
• Climate change
• Transitional risk
• Physical risk