A climate future broadly aligned with current scientific expectations could reduce the average European insurer’s portfolio return by around 10% by 2050, according to Ortec Finance.
Looking further ahead, returns could be approximately 15% lower by 2065 under Ortec Finance’s Limited Action scenario, which assumes 2.8°C of warming, and 31% lower under its High Warming scenario, which assumes 3.8°C of warming by 2100.
Ortec Finance’s A changing climate, a changing risk landscape: The 2026 European insurance perspective also said that European insurers must rethink sovereign debt risk as climate change threatens government finances and bond valuations. Under its High Warming scenario Ortec Finance said returns on French sovereign bond investments could decline by around 10% relative to current expectations, compared with around 2% for the EU aggregate.
Maurits van Joolingen, managing director, climate scenarios and sustainability at Ortec Finance, said: "Sovereign bonds are widely viewed as among the safest assets, play a central role in insurers’ portfolios, and serve as a cornerstone of global financial stability. But climate change can weaken growth, strain public finances and increase borrowing costs, turning physical climate risk into sovereign credit risk.
“For European insurers, this means looking beyond broad regional assumptions and understanding how climate risks differ across individual sovereign markets."
