Insurers' climate change risk management quality and natural disasters

Abstract

We perform a textual analysis of insurers' climate risk disclosures and construct a climate change risk management quality index. Our index captures to what extent insurers identify, manage, and adjust their business model to climate change risk. We find that natural disasters in an insurer's home state lead to an increase in climate change risk management quality. The effect of natural disasters in an insurer's geographic markets on climate change risk management seems to be less pronounced. Overall, these results are consistent with salience theories of choice.