The University of Cambridge’s Institute for Sustainability Leadership (CISL), in collaboration with ClimateWise, has released new research which outlines how insurers and governments are missing key aspects of risk and urgently need to take a more systemic approach.

Redefining Systemic Risk Governance in the Insurance Industry argues that the escalating convergence of climate, nature, macroeconomic, and geopolitical risks is making global financial systems more fragile. The research warns that whilst physical climate impacts, such as wildfires and floods, are increasing in frequency and severity, traditional risk models are struggling to capture the nature of these risks.

The cost of inaction is already clear. In 2024, natural disasters caused over $318bn in US economic losses, and global insured losses have topped $100bn every year since 2017.

The report considers practical examples of how climate and nature risks manifest across the agriculture, real estate, energy, transport and marine sectors. For example, in real estate, over 13 million US properties face 100-year flood risks, yet banks and insurers often rely on divergent models that overlook natural buffers such as wetlands.

The report introduces Systemic Risk Governance, which is a proactive approach that replaces fragmented risk management with cross-sector collaboration to build shared resilience. It calls for insurers, banks, investors, and regulators to work together using shared data, integrated models, and common resilience goals.

Dr Nina Seega, director, Centre for Sustainable Finance, CISL, said: “Against the backdrop of ever-increasing physical impacts of a changing climate, this ClimateWise report highlights a crucial opportunity to transition from isolated risk management to co-operative, systemic resilience. The growing convergence of climate, nature, and macroeconomics presents complex challenges that no single sector can solve alone.”

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