Italian Insurers Face €7B Climate Losses Amid ESG and Transition Challenges

In 2023 alone, Italian insurance companies incurred over €7 billion in climate-related claims, a more than threefold increase compared to the average for the previous five-year period. At the same time, premium income from catastrophe risks rose to €2.8 billion (12.4% higher than in 2022), a sign of growing exposure to climate risk and the need to restructure the sector’s insurance, management, and financial models.

These are some of the most significant findings from the third annual monitoring of natural disaster and sustainability risks, covering 2023 and published in June 2025 by IVASS, the Italian Insurance Supervisory Authority. The survey, conducted on 89 Italian insurance companies, shows how the sector is under increasing pressure to structurally integrate ESG (environmental, social, and governance) factors into both underwriting policies and investment portfolios.

ESG Governance and Insurance Underwriting: Still a Bumpy Road

Ninety-three percent of Italian insurance companies stated that they have already integrated or intend to integrate ESG factors into their governance systems, but with significant differences in scale. Large Italian insurance companies have dedicated ESG committees or senior management teams, while smaller companies integrate ESG skills into existing structures. Specifically:

46% of Italian insurance companies have board committees with ESG responsibilities, of which only 6.4% are specifically dedicated to these issues;

55.6% of companies have senior management committees with ESG mandates, of which 27.2% have specific expertise, a choice adopted by an additional 13 companies compared to the previous financial year;

In 74.3% of Italian insurance companies, ESG responsibilities are entrusted to senior management functions; 19.2% are specifically dedicated to these issues.

To incentivize good management of sustainability risks and opportunities, more than half of companies link staff remuneration to sustainability objectives.

Climate impact analysis is increasingly central to insurance risk management

According to IVASS’s analysis, over 75% of Italian insurance companies declared that they had carried out materiality assessments for physical and transition risks: of these, 66% carried out scenario analyses with time horizons reaching up to 2050, adopting models developed by NGFS (Network for Greening the Financial System) and IPCC (Intergovernmental Panel on Climate Change).

Generally, scenarios with temperature increases exceeding 2°C are considered the most impactful for insurance . Companies have already initiated mitigation actions, such as reviewing rates, contractual limits, and/or excluding certain events from coverage; implementing excess-of-loss reinsurance plans to mitigate peak losses; and implementing control measures and tolerance limits for the underwriting of physical and sustainable investment risks.

Italian insurance Companies: Extreme Event Pressure and Profitability Under Stress

Between 2018 and 2023, premium income for natural disaster coverage increased from €1.8 billion to €2.8 billion . But claims followed an even steeper curve: in 2023 alone, losses related to weather events exceeded €7 billion (while between 2018 and 2022 they were stuck at €1.5-€2 billion).

In the first case, the increase in premiums collected is primarily due to an increase in companies’ exposure to the risks underwritten (primarily flood risk, which in 2023 grew by 15% for commercial properties and 8.6% for residential properties). It is no coincidence that almost all premiums for catastrophe risks come from ” fire and other property damage “policies and the” other auto insurance ” segment.

In the second case, too, the increase in claims costs is primarily due to adverse and intense weather events that specifically affected large cities. In 2023, in fact, the overall costs for paid and reserved claims and management expenses amounted to 352% of earned premiums , reaching the highest value since 2018.

The situation is particularly critical for hail risk, which represents 66.5% of premiums collected and a full 73.9% of claims paid.

These extreme events have led to an intensification of the use of reinsurance (+13.4% in 2023), with the share of premiums ceded reaching 38.2% of the total for climate risks, more than double the average for the non-life sector (18.4%).

Sustainable investments and the transition: an obstacle course

On the financial side, Italian companies hold approximately 64 billion euros (equal to 6.4% of the total invested) in sectors exposed to transition risks , of which 10 billion in sectors linked to fossil fuels.

Seventy-nine percent of companies declared they have adopted a sustainable investment policy, marking a slight increase from the previous survey. Specifically, the number of companies that have set a decarbonization target for their investment portfolio is growing , in line with the Paris Agreement, which calls for net-zero greenhouse gas emissions by 2050. These companies account for a 67% market share in terms of total investments.

The data also showed that in 2023, the average emissions intensity associated with insurance sector investments was estimated at 74 tonnes of CO₂ per million euros invested (Scope 1) and 13 tonnes (Scope 2). This figure is still incomplete due to the difficulties reported by companies in obtaining complete data, especially on indirect investments.

Finally, Italian insurance companies report persistent difficulties in adopting transition plans: only four groups have already developed a comprehensive plan, while another 18 are working on a framework. Regulatory complexity, incomplete data, and the lack of shared ESG metrics, along with difficulties in forecasting profitability and the need to adapt the entire business model, appear to be the main factors.

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(Featured image by Aldward Castillo via Unsplash)

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First published in ESG NEWS. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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