Climate Risk Assessment for Insurance Companies
This thematic article discusses the growing concern of physical climate risk for insurers in Barbados, focusing on the protection gap between insured and economically insurable properties. It highlights the Financial Services Commission’s (FSC) efforts to enhance climate risk assessments through stress testing and the monitoring of insurers' capital positions. The study found a significant protection gap of around 26% for property catastrophe coverage, with high gaps in certain parishes, especially for tourism-related properties. Uninsured losses, particularly from storm surges and wind events, were projected to be substantial. The study suggests expanding data collection, incorporating other insurance sectors like motor, and refining stress testing to better assess financial resilience in the face of climate risks.
