G lobal supply chains are increasingly exposed to climate-related disruptions, redrawing the boundaries of what can be insured and how risk is distributed across the global economy. In recent years insured catastrophe losses have grown by roughly 5–7% per year in real terms. As insurers retreat from high-risk geographies and sectors, the burden of loss increasingly shifts to public budgets, enterprises, and households.
Disruption of international supply chains are a major systemic risk for Europe and countries beyond – alongside food insecurity, energy instability and financial stress. The 2021 floods in Germany and Belgium paralysed logistics and manufacturing across Europe and droughts in southern Europe in 2022 cut harvests and strained water supplies.
“Climate shocks are now driving supply-chain shocks, cascading through interconnected networks rather than remaining isolated disasters. As local weather extremes ripple through interdependent systems, they can quickly become global shortages and delays that threaten economic security,” says Dr. Mikael A. Mikaelsson, Policy Fellow at Stockholm Environment Institute (SEI).
Insurance and reinsurance, the financial mechanisms normally absorbing these shocks, are being tested by the growing complexity, frequency, and severity of climate hazards. The report Insurance and reinsurance under climate stress: managing systemic risk in global supply chains draws on interviews with leading experts from several of Europe’s top (re)insurance actors to examine how these sectors are responding to climate change challenges and the emerging limits of traditional risk-transfer models.
Without substantial changes to business models, regulation, and public-private coordination, there is a risk the sector will undermine stability by amplifying systemic climate stress, the report says.
“Climate risk is becoming systemic faster than insurance systems can adapt – and when losses can no longer be diversified, insurance stops working as designed,” says Mikael A. Mikaelsson.
Key findings
“Insurance alone cannot manage systemic climate risk. Without stronger adaptation, better data, and coordinated public–private governance, risk transfer will increasingly fail where resilience is needed most,” says Mikael A. Mikaelsson.
About the report
The report is based on a literature review and expert consultations with senior climate risk specialists across the European (re)insurance ecosystem. Based on the findings, three recommendations are directed at policymakers and regulators, the (re)insurance sector, and businesses whose operations depend on insurable and resilient supply chains.
For further information, contact:
In Stockholm, Sweden
Mikael Allan Mikaelsson, Policy Fellow, SEI, mikael.mikaelsson@sei.org, +46 73 050 1818
Ulrika Lamberth, Senior Press Officer, SEI, ulrika.lamberth@sei.org , + 46 73 801 7053
In Seattle, US
Lynsi Burton, Communications Officer, SEI US, lynsi.burton@sei.org , +1 360 485 3041
Stockholm Environment Institute is an international non-profit research institute that tackles climate, environment and sustainable development challenges. We empower partners to meet these challenges through cutting-edge research, knowledge, tools and capacity building. Through SEI’s HQ and seven centres around the world, we engage with policy, practice and development action for a sustainable, prosperous future for all. www.sei.org @SEIresearch