CNP Assurances launches Climate Risk Index for French insurance sector

25/06/2024 News

CNP Assurances, in collaboration with the DIALog Chair, has released a green paper titled "Climate Risk and Impact on Insurance." This paper introduces a new climate risk index specifically tailored to French data. The DIALog Chair, an academic excellence hub, focuses on modern risk assessment methods that integrate data science, artificial intelligence, and big data techniques. One significant outcome of their research is the adaptation of actuarial climate indices to enhance the evaluation and measurement of climate risks in France.

Recent studies predict an increase in the frequency and severity of climate-related events. For instance, Germany, Switzerland, and Italy have recently experienced devastating floods, while Brazil faces a series of extreme weather events, including unprecedented floods in the south and a severe drought forecast for summer 2024.

The impact of climate change is expected to be profound and widespread, particularly affecting sectors like property insurance, health insurance, and life insurance. These changes could threaten the sustainability of insurance programs by necessitating higher premiums and increased solvency capital due to rising claims.

In response to these challenges, CNP Assurances and the DIALog Chair team have adapted the Actuarial Climate Index for French data. This index, already in use in North America and Australia, aims to provide private and public sectors, especially insurers, with reliable tools to measure long-term climate risks. These tools are detailed in the green paper and help quantify climate change effects on insurers' balance sheets, measure its impact on the sustainability of insurance activities, test the resilience of market players, and assist in public policy and prevention strategy formulation.

Given that historical data no longer accurately reflects current weather conditions, insurers must reassess their risk models and incorporate climate change projections. This green paper addresses the need for factual measures to guide risk management experts. It explores, for example, the relationship between heatwaves and mortality in France, emphasizing the importance of scenario-based approaches for internal risk and solvency assessments.

The French Actuarial Climate Index (ICAF) combines six components: maximum and minimum temperatures, precipitation, droughts, wind power, and sea level. All calculations are aggregated regionally across France and Corsica, component by component.

Marie-Aude Thépaut, CEO of CNP Assurances, explains, “What are the systemic impacts of heatwaves? How will intense heat episodes evolve in the future? What will be the consequences for people and property? These urgent questions require answers from insurers. The DIALog Chair, partnering with CNP Assurances, provides actuarial tools to better understand these impacts on our daily lives.”

Download the paper (in French) on CNP Assurances' website

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