EIOPA flags extreme heat as top climate liability risk for European life insurers and pension providers

Traders Union
All News
Regulators
EIOPA flags extreme heat risk

Highlights

EIOPA identifies extreme heat as the primary climate-related liability risk for European life and health insurers and occupational pension providers, with impacts expected to intensify in coming decades.
Heatwaves caused around 300,000 deaths since 2000 in Europe, accounting for 97% of climate-related fatalities, and projected future mortality may reach COVID-19 pandemic levels under severe scenarios.
EIOPA's new risk-scoring framework highlights medical expense, income protection, workers' compensation, and similar-to-life health insurance as the business lines most exposed to heat-related risks.

Heat risk framework and business lines most exposed

According to EIOPA, a new study reported that extreme heat is the leading climate-related liability risk for life and health insurers and occupational pension providers in Europe. The authority says wider public-sector healthcare coverage, diversification across portfolios and offsetting effects are helping contain the financial impact for now, but the risk is expected to grow over the coming decades.

Heatwaves are already the deadliest climate-related hazard in Europe, with around 300,000 deaths since 2000, or about 97% of fatalities linked to extreme weather and climate events. EIOPA says scientists expect heatwaves to become more frequent, more intense and longer-lasting, with heat-related deaths in severe scenarios potentially reaching levels comparable to those seen during the COVID-19 pandemic.

To assess the impact, EIOPA developed an illustrative risk-scoring framework based on hazard, vulnerability and exposure metrics. The methodology broadly aligns with the authority's approach for measuring non-life insurers' underwriting exposure to physical climate change risk.

The lines of business projected to be most affected include medical expense insurance, income protection insurance and workers' compensation in the non-life segment, as well as similar-to-life health insurance and other non-participating life insurance in the life segment. EIOPA says the effects will remain highly dependent on individual products and portfolios because climate change does not affect mortality, morbidity and longevity risks uniformly.

Our earlier coverage of the UK Financial Conduct Authority’s climate reporting decision explained that the regulator chose to keep a flexible “comply or explain” regime for listed companies rather than mandate the UK SRS S2 climate disclosure standard. We noted that the shift was driven by concerns over compliance costs and international competitiveness, even as most FTSE 350 firms already report under TCFD-aligned requirements.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.