In the insurance industry, climate change is still primarily associated with extreme weather events and natural catastrophes. Floods, wildfires, and storms dominate the agenda, and for good reason: these events generate visible losses and immediate financial consequences. Catastrophe models, reinsurance markets, and regulatory stress tests have all evolved to deal with the growing financial impact of extreme weather. Yet this focus on physical damage obscures another climate exposure that may prove just as consequential for parts of the industry: patterns of human health. For life insurers whose liabilities extend decades into the future, these slow-moving demographic effects may become one of the most important climate risks of all.
Over the past decade, insurers and regulators have made significant progress in integrating climate considerations into property portfolios. Catastrophe modelling has become more sophisticated, climate stress tests are increasingly common, and supervisory frameworks now expect Insurers to assess the impact of extreme weather events on their balance sheets. The logic is intuitive and easy to communicate: if hurricanes are expected to become more frequent in a particular region, the owner of a house located there will likely face higher insurance premiums. Climate risk translates directly into higher expected property losses, a risk that is shared across the insurance ecosystem. But this focus on physical damage to assets ignores the risks that lie at the heart of life and health insurance: how a changing climate could influence the health of its clients. In practice, this risk is shared across the insurance ecosystem: primary insurers cover the first layer of losses, while extreme events are often transferred to global reinsurers and, increasingly, to capital markets through catastrophe bonds.
This blind spot is striking, especially as life insurance operates on the same time horizon as climate change itself. Mortality assumptions underlying life insurance and pension products extend several decades into the future, traditionally relying on demographic trends, medical progress, and socioeconomic development. Demographic projections implicitly assume that improvements in health and longevity will continue along broadly predictable paths. Environmental drivers of mortality, however, have rarely been incorporated explicitly into these models. Yet climate change is expected to influence health outcomes through a range of mechanisms that unfold gradually over long periods. For insurers managing liabilities that may last half a century, these environmental dynamics could slowly reshape the demographic foundations of their business.
One of the most direct ways climate change affects human health is through shifts in heat- and cold-related mortality. Rising temperatures increase mortality during extreme heat events, particularly among older and more vulnerable populations. At the same time, milder winters reduce cold-related mortality in many regions. The result is not simply a uniform increase in deaths, but a gradual rebalancing of mortality risks. In some locations, these effects partially offset each other, while in others, heat-related mortality increasingly dominates. Although these shifts may appear modest from year to year, they represent structural changes in how environmental conditions influence human survival.
the next frontier of climate risk in insurance may not lie only in better modelling storms and floods.
How can these temperature effects be quantified in practice? Estimating them requires combining insights from climate science, public health, and actuarial modelling. Climate scientists first simulate the future evolution of the atmosphere using standardized scenarios known as Representative Concentration Pathways (RCPs), which describe how greenhouse gas emissions may evolve under different socioeconomic futures and the levels of warming they produce. These projected temperature paths are then studied by epidemiologists, who analyse historical data linking daily temperatures and mortality using statistical tools such as distributed lag non-linear models. The result is a set of location- and age-specific “relative risk” curves that measure how the probability of death increases or decreases at different temperatures. These excess risks can then be incorporated into climate-adjusted life tables—the basic building blocks used by actuaries to price policies and calculate reserves.
From an actuarial perspective, even small changes in mortality patterns can have meaningful implications when they persist over long time horizons. Life insurance and annuity valuations depend on survival probabilities that extend decades into the future. A slight but systematic shift in mortality rates can gradually alter life expectancy projections, affecting both insurance payouts and annuity liabilities. Unlike catastrophic events, which produce sudden financial shocks, climate-driven mortality changes accumulate slowly over time. Their importance lies not in their immediate magnitude but in their persistence and direction, gradually reshaping the long-term demographic environment in which life insurers operate.
Another important characteristic of climate-related mortality risk is its strong geographic variation. Climate change does not affect all regions equally, and populations respond differently to temperature extremes depending on local climate conditions, infrastructure, and adaptation capacity. Quantitative estimates illustrate these contrasts clearly. For example, current life tables predict that the life expectancy of a 20-year-old man living in Rome in 2025 would be around 89.5 years if temperatures remained at historical levels. Under a strong warming scenario such as RCP 7.0, however, that expectation could fall by roughly 9 months as heat-related mortality gradually increases. By contrast, the same individual living in Helsinki might experience the opposite effect, gaining about 3 months of life expectancy as milder winters reduce cold-related deaths. These shifts translate into financial impacts for insurers: pricing and reserves for life insurance and annuity products may change by roughly 0.5 to 3 percent when climate factors are included. While these numbers appear modest relative to other financial risks, they are systematic and affect entire populations.
Despite growing scientific evidence on the health effects of climate change, translating these insights into actuarial practice remains a major challenge. Recent collaborations between insurers and academic researchers are beginning to explore ways to close this analytical gap. By combining climate projections with epidemiological evidence on temperature-related mortality, researchers are developing frameworks that translate environmental changes into adjustments to mortality tables. These approaches allow insurers to evaluate how different climate scenarios may influence survival probabilities and long-term liabilities. A growing international research community is now working at the intersection of climate science, public health, and actuarial modelling to better understand how environmental change may affect mortality and insurance risk.
Mortality, however, is only part of the story. Climate change is also expected to influence health patterns through channels such as air pollution, heat stress, and the interaction between environmental conditions and chronic disease. Episodes of extreme heat combined with poor air quality can significantly increase respiratory and cardiovascular risks, particularly for vulnerable populations. These mechanisms have direct implications for health insurance and long-term care systems. Understanding how environmental factors affect both mortality and health will therefore be essential for insurers seeking to assess the full health-related impact of climate change.
For decades, the insurance industry has invested in catastrophe models to understand how climate change may affect physical assets. Those tools remain essential. But as the climate continues to warm, insurers will also need a parallel set of analytical frameworks capable of capturing how environmental conditions influence human health and longevity. The challenge is not only scientific but also actuarial: translating climate projections and epidemiological evidence into the demographic assumptions that underpin pricing, reserving, and long-term risk management. In that sense, the next frontier of climate risk in insurance may not lie only in better modelling storms and floods, but also in developing the tools needed to understand how a changing climate reshapes the risks faced by people themselves.
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