The impact of climate risks on insurers’ profitability: Evidence from China

In recent years, increasing climate risks have caused serious damage to global socio-economic activities and financial stability. Based on this, this paper empirically explores the impact of climate risk on insurers’ profitability based on the data of 197 insurance companies in China from 2010 to 2021. The empirical findings are as follows: firstly, both physical risk and transition risk significantly reduce insurers’ profitability. Secondly, physical risk reduces insurers’ profitability mainly by increasing reinsurance rates. The government's climate protection performance mitigates the negative effects of transition risk. Finally, small and Property & Casualty insurers exhibit greater vulnerability to the shocks of physical risk, while the shocks of transition risk are more pronounced for large and life insurers.