Ortec Finance, recognised for its technology and risk-management expertise within the financial sector, has issued new findings that underscore how rapidly climate pressures are reshaping the insurance industry’s financial outlook.
Throughout its analysis, Ortec Finance attributes the growing strain on the sector to rising physical hazards, climate-linked inflation, and the widening mismatch between asset exposures and underwriting concentrations.
According to Ortec Finance, if global temperatures continue on their current high-warming track, insurers could face nominal investment losses approaching 19% by 2050, with real losses surpassing that figure once persistent inflation is accounted for.
The company explains that these pressures are already affecting investment returns, premium levels, and claim costs in ways that challenge the traditional insurance model.
Ortec Finance cautions that the combination of weakening portfolio performance and increasing liabilities could undermine widely used risk-transfer structures and push portions of global assets toward becoming uninsurable.
The company stresses that insurers must refine their understanding of how climate impacts vary across regions and across both sides of the balance sheet. Ortec Finance notes that strategies based solely on historical performance or market size risk overlooking how regional vulnerabilities are shifting under changing climate conditions.
“For insurance companies, this means rethinking strategic asset allocation to include climate resilience. Home bias, often driven by familiarity, regulatory constraints, and perceived stability, can become a source of concentrated climate risk. Investment frameworks need to evolve to include regional climate sensitivities, infrastructure resilience, policy uncertainty and the limits of risk-transfer mechanisms such as reinsurance in portfolio construction,” commented Maurits van Joolingen, Managing Director of Climate Scenarios & Sustainability at Ortec Finance.
Ortec Finance highlights that many insurers hold globally diversified asset portfolios while underwriting risks that are clustered in specific regions. This structural imbalance, the company explains, heightens exposure when climate-related events strike. Severe events can simultaneously increase claims and diminish the value of local assets, creating compounding pressures.
Although distributing exposures across regions provides some protection, Ortec Finance points out that its effectiveness is narrowing as climate-related events increasingly affect multiple locations through shared vulnerabilities.
The company’s findings identify real estate exposures as especially sensitive. In a high-warming scenario, Ortec Finance reports that real assets in high-risk areas across North America and Europe show comparable underperformance of roughly 50% by 2050, whereas assets in low-risk zones in the same regions see declines closer to 16–17%. Discussing liability, Ortec Finance notes that non-life insurers face rising claims costs due to escalating reconstruction and repair expenses.
A further issue identified by Ortec Finance is the gap between the growing severity of physical risks and how those risks are currently reflected in asset prices. The company warns that many hazards, particularly those that develop in non-linear or irreversible ways, remain understated in valuations, leaving insurers open to abrupt market adjustments.
“While the pricing gap represents an area of risk for insurers, it also creates an enormous opportunity for them to better understand the entirety of climate risk so they can position their portfolios to benefit from a repricing over the long term,” added Doruk Onal, Climate Risk Specialist at Ortec Finance.
While Ortec Finance’s high-warming pathways illustrate significant challenges for the industry, the company emphasises that its transition-aligned scenarios present a markedly more favourable outcome. In these scenarios, the long-term benefits of a successful shift to a low-carbon economy support premium affordability, stabilise claim patterns, and help preserve the continuity of insurance operations.
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