A rise of at least two
Returns for insurers under four different climate change scenarios were analysed by Ravi Rastogi, insurance group leader for Europe at Mercer's insurance investment team, speaking at the Reactions London Market Conference today.
The four scenarios analysed included a two degree rise, a three degree
Sectors saw varying exposure, with renewables and nuclear business suffering the least, with coal, utilities and materials hit hardest.
For the minimum two-degree rise scenario, there was an 8% difference between the best and the worst impact over the next five years depending on
“Even if it is only 8% per annum and the equity investment in your portfolio is as small as 10% it is still 80 basis points of impact per annum over the next five years projected,” said Rastogi.
“In the current low interest rate environment I would say that 80 basis points
Firstly, it will be hit by physical losses such as
Secondly, it risks having stranded assets on the investment side of its portfolio.
Thirdly, there are liability issues, such as when supply chains are hit and contingent losses take place, for
“There is a time when an idea comes
"Then it merges into a regime where it is a negative differentiator when you’re not doing anything about it,” he said.
He believes the sector is now entering that second stage.