Understanding Future Challenges in Insurance Affordability

Insurance affordability and climate change between now and 2050 underpin the insurance Climate Vulnerability Assessment (insurance CVA)

Insurance affordability and climate change between now and 2050 underpin the insurance Climate Vulnerability Assessment (insurance CVA) to help improve the understanding of future challenges. 

Led by Australian Prudential Regulation Authority (APRA) with the Insurance Council of Australia (ICA), along with various government and private sector organisations in collaboration with IAG, Suncorp, Allianz, QBE and Hollard, the insurance CVA will model insurance affordability for two climate scenarios and an additional baseline scenario, which are not based on actual predictions.  

The intention of the scenarios is to provide stakeholders with a more informed view of how insurance affordability may evolve in the coming years in response to the physical and transition risks from a changing climate.  

APRA Executive Board Member Suzanne Smith highlighted that financial regulators, including APRA, can play an important role in exploring how general insurance affordability may change into the future.  

“APRA aims to support a resilient and robust insurance sector capable of meeting the needs of Australians in an increasingly uncertain climate. The findings of the insurance CVA will help to improve the national understanding of risks posed by climate change to general insurance and the impact on affordability and the protection gap in Australia. These insights can support a range of stakeholders to better manage future climate related risks,” Ms Smith said.  

This initiative builds on the 2022 banking Climate Vulnerability Assessment which examined the possible effects of climate change on bank credit risk and identified that climate change and the response to it may drive pockets of risk across Australia.  

APRA’s insurance CVA information paper is available on their website.