The Effects of Climate Change in the Insurance Sector: A Case of Turkey

Abstract

While climate change is one of the biggest threats to life on the planet, it’s obvious that it’ll have negative effects on the economic system if necessary precautions aren’t taken. Climate change is increasing its impact day-by-day and causes great financial losses. The insurance sector is the most affected by the consequences of climate change. Insurance companies need to give importance to research, understanding, risk analysis and management in order to reduce the cost they’ve to bear in case of damage. While climate change is a risk for the sector, it creates new opportunities. It’s become a necessity today to carry out studies to minimize the effects of climate change and to raise awareness. Severe effects of weather events caused by climate change; the annual average temperature, the total annual precipitation and the number of extreme events. In this study, the effect of climate change on the compensation paid in the disease/health branch, agriculture branch and fire and natural disasters insurance branches was examined. Claims paid in five branches between 1990and2021 and meteorological data were tested with standard unit-root tests, structural break analyzes and relationship between them was determined by ARDL cointegration test. Significant relationships between the variables are determined.

Keywords

• climate change
• global warming
• insurance
• parametric insurance