Behind the climate risk-driven insurer retreat, and how it could spread to Asia


Behind the climate risk-driven insurer retreat and how it could spread to Asia



  • State Farm’s exit from insuring new homeowners in California due to wildfires, climate risks, and inflation may signal a trend of insurer retreats in response to climate change.
  • Research by Cody Dong, a senior associate at MSCI ESG and climate research, suggests that climate-related insurer retreats could expand to Asia.

Climate-Related Hazard Assessment:

  • Dong conducted a climate-exposure assessment of insured assets using MSCI metrics and insurance underwriting data.
  • By 2050, the assessment indicates that 44% of US counties may have a hazard-percentile score over 75, signifying higher wildfire exposure.

Climate Risk in Asia:

  • Dong applied similar methods to assess climate risks in Asia, focusing on extreme heat and tropical cyclones as significant hazards.
  • By 2050, 9% of Chinese districts and 91% of Japanese municipal regions may have high extreme heat and tropical cyclone exposures, respectively.

Impact on Property Insurance:

  • Increasing physical climate risks will exert pressure on insurers’ profitability and may lead to underinsured households.
  • Property insurance policies are renewed annually, allowing insurers to make short-term adjustments, but long-term strategies are needed to address climate trends.

Opportunities for Growth:

  • While some insurers may retreat from high-risk markets, others with higher-risk appetites could capitalize on growth opportunities.
  • The Asia-Pacific (APAC) region has a significant protection gap, with 86% of losses missing insurance coverage in 2022.
  • Closing this protection gap could represent growth opportunities for APAC insurance companies.


  • Climate-related insurer retreats driven by climate risks and underinsurance challenges may extend to Asia.
  • The protection gap in the APAC region presents growth potential for insurers willing to address climate-related risks and offer coverage solutions.


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