IMPACT OF CLIMATE CHANGE ON INSURANCE RISK AND PRICING

Abstract

This study examined the perceptions of insured individuals in Kathmandu Valley, Nepal, regarding the impact of climate-related factors—including extreme weather events, climate change regulations, insurers' risk management practices, and geographical exposure—on insurance risk and pricing. A combination of descriptive and causal-comparative research designs was employed. Data were collected from 384 insured individuals using a structured online survey with a 5-point Likert scale and analyzed using SPSS version 25. The study applied descriptive statistics, correlation analysis, and regression analysis to evaluate relationships and test hypotheses. Findings revealed that insured individuals perceived climate-related factors as influencing insurance risk and pricing, with significant correlations observed across all factors. However, regression analysis indicated that only insurers' risk management practices and geographical exposure significantly impacted insurance risk and pricing. Other factors, such as the frequency and severity of extreme weather events and climate change regulations, did not exhibit significant effects. The study concludes that insurers in Nepal need to prioritize geographical exposure and risk management practices in their pricing models while enhancing their integration of climate-related factors. Practical implications include the development of comprehensive risk management strategies, while theoretical contributions expand the understanding of climate change’s impact on insurance. Policy recommendations highlight the need for stricter climate regulations and incentives for resilience measures. Future research could explore the role of advanced technologies in climate risk modeling and extend the study to other regions in Nepal to address location specific challenges.