Reinsurance as a Stabilizing Force in Climate and Catastrophe Risk

Reinsurance as a Stabilizing Force in Climate and Catastrophe Risk

As global climate change intensifies and extreme weather events become more frequent, catastrophe risks pose a severe challenge to insurers' solvency. In this context, reinsurance serves as the core mechanism for risk diversification by absorbing large risk exposures transferred from primary insurers, effectively smoothing industry volatility.

Reinsurance not only provides a capital buffer for direct insurers but also fosters the construction of a global risk pool. Through international reinsurance arrangements, losses from regional disasters are spread globally, preventing any single market from facing liquidity crises due to massive claims, thereby maintaining financial system stability.

• Optimize the capital structure of direct insurers to enhance underwriting capacity.
• Leverage actuarial models to assess long-term climate trends and support pricing.
• Establish a multi-level risk transfer mechanism to enhance system resilience.