The vast majority of Bermudian P&C (re)insurers view climate change as both a risk and an opportunity but the bulk of companies on the island have as yet failed to implement or even plan changes to business strategy in response to the shift in weather patterns, according to a new survey from the Bermuda Monetary Authority (BMA).


Bermuda’s financial watchdog has become the latest authority to further integrate the issue of sustainability into its regulatory frameworks, and the organisation rolled out a survey to member (re)insurance companies asking them to outline the steps they are taking to address climate change and what opportunities they believe may arise.

The BMA received 170 responses, including submissions from over 80 percent of the registered large commercial insurers and life and P&C groups.

“P&C companies seem more advanced at considering climate-related risks in their risk management practices, given their historical exposure to climate-related risks in lines of business such as property catastrophe,” the BMA said.

“Climate change impact initiatives of life companies appear more concentrated in the ambit of investment policy,” the regulator added.

The majority of respondents at companies operating in Bermuda’s P&C and life markets feel climate change is both a risk and an opportunity for their operations, however.

As the survey found, 86.6 percent of P&C and 71.7 percent of life respondents said climate change presents both risk and opportunity.

“Opportunities are mainly seen in the P&C sector particularly for early movers, largely through greening of the economy (i.e. moving to low-carbon economies) and offering extended and new types of coverage to renewable sectors and clean energy projects,” the BMA said.


The potential for reduced asset values for carbon-intensive assets or threats to the viability of certain business lines, for example when governments implement policies that support shifting to low-carbon economies, are regarded as the main transition risks, the study found.

Concerns surrounding an increase in physical risk such as greater frequency and severity of natural catastrophes is regarded as a gradually increasing risk, albeit mainly for P&C companies.

Insurers are also conscious of liability risk potentially emanating from their underwriting activities, although at this stage many view it as less material, the BMA’s survey discovered.

Other potential challenges include a possible increase in regulatory compliance burdens and investor-related litigation and liability risks as a consequence of accelerated disclosures.

However, respondents to the survey felt the greatest challenge was predicting, over a long-term horizon, the pace and magnitude of the legal, technological, policy and market actions that will be required to move societies to low-carbon economies.

No major shift in strategy

As the survey found, climate change has not yet caused a major shift in strategy for most insurers. The report did find that the responsibility for environmental, social and governance (ESG)/climate change is more commonly at an executive/senior management level in P&C companies than in their life counterparts.

The issue of climate change is mainly owned by the chief risk officer and supported by the existing governance/committee structures, the study discovered.

But there is a growing number of insurers that have appointed or designated a chief sustainability officer, or there are responsibilities assigned at a board level, which goes beyond merely understanding climate change as a risk only.


Some of the P&C and life insurers surveyed said they have implemented an ESG strategy on their investment portfolios, for example not reinvesting in thermal coal mining or power generation using coal.

“Beyond direct physical financial risks, a meaningful number of insurers both in the P&C and life sectors mentioned significant reputational risk amongst their customers/investors, etc, as a key driver for their actions concerning climate change,” the BMA said.

Although it has not yet caused a major change in strategy, some P&C carriers have exited certain lines of business that are exposed to climate risk, for example physical risk impacts on property lines, evidenced by increased wildfires, storms and flooding.

The survey also found that the majority of respondents expect that transitioning to a low-carbon economy, physical risk events and liability risk will impact the underwriting process and performance, as well as the type of products that are offered.


The expectation is that opportunities will arise for P&C carriers in the form of new exposures and insurance products related to the renewable energy industry, while at the same time insurers will exit high carbon-intensive lines and products.

Increased volatility in underwriting results

Elsewhere, Bermuda’s position as a world leader in the provision of natural catastrophe (re)insurance means most P&C carriers on the island have a very advanced view on physical risk, and consequently expect trends towards higher volatility of underwriting results and a continuously growing claims burden in the medium to long term. Pricing will increase in response.

Such a scenario might initially increase demand in insurance products, respondents to the survey found, but in the long term, the result might ultimately be the widening of the protection gap should insurance become expensive.

Insurers, the BMA survey found, “see strategic exposure management as key” with a focus on limits, exclusions, diversification, line reductions, risk appetite and more.

“The further development and adjustment of models and timely reflections in pricing were also key areas identified,” the BMA said.


P&C industry respondents to the survey said that traditional reinsurance remains the most popular current risk management technique. Advanced analytics was the second most popular tool for risk management for P&C carriers, and is the top method used by life companies.

Among the other options referenced are alternative risk transfer and working with policyholders on mitigation and climate change adaptation, for example.

“A notable number of insurers also reported that they had not completed a detailed risk assessment concerning climate change, which will allow them to determine how to holistically manage this risk with tailored reduction, mitigation and transfer strategies,” the survey found.

Climate change not a consideration for P&C’s investments

Although the underwriting sides of their operations are clearly exposed to the impact of climate change, the majority of P&C insurers do not explicitly consider the peril in their investment policies, the survey discovered. The majority of life companies do consider them though.

Those insurers that have integrated climate change risks in their investment policies consider the risk in a general way and are not describing resulting actions. ESG screening of investments, or a consideration of ESG factors, are some of the approaches taken, for example.

“Some companies have made concrete decisions to avoid and reduce investments into companies with activities considered to be contributing to climate change including establishing limits (e.g. limits on the level of coal-related investments),” the BMA said.