The effect of climate change on the insurance industry: how planning and control functions affect the natural claims monitoring process

Abstract

The consequences of natural events devastate most economies and industries with their pervasive effects. The insurance industry is heavily affected by this phenomenon. This research will introduce the main features of the Non-Life insurance company business. To do that, this thesis will consider industry-specific key performance indicators that summarize the technical aspects of the operating performance, for example the underwriting policy, the claims management, and the reinsurance policy. Moreover, the thesis will illustrate the role of the entire industry in order to limit the effect of climate change. For this reason, mitigation and adaptation measures will be treated. The planning and control functions of insurance companies support management decisions. The operating profitability has a high priority in the monitoring process and its deeply influenced by the trend of claims. This last figure will be analyzed in the research. While the research and the available literature have been focused mainly on the global effect of climate change on the insurance industry, there has been less focus on translating this phenomenon into management control system terms. Therefore, the thesis will investigate what kind of influence weather-related losses have on the claims and operating profitability. Finally, together with the findings and conclusions, the research will focus on the future challenges that the planning and control function will face due to climate change.