Work

Climate storylines to build resilience for European public and private risk finance instruments against remote events

Year: 2025

Type: article

Abstract: Europe is increasingly threatened by climate-induced events happening remotely from the continent. To test the resilience of selected public and private finance risk instruments against external shocks we analyse multiple hypothetical scenarios based on historic events, focusing on cyclone risks, and various alternative realisations, so-called climate storylines. We present the storyline approach as a systems approach to examine whether events outside a system can affect elements within the system. Furthermore, we provide a framework to analyse possible transmission channels of such remote events jointly as well as separately. In doing so we combine a multi-model approach within single and multi-climate storylines to better address the various vulnerabilities of risk management and adaptation options for today and in the future. We specifically focus on humanitarian emergency assistance (via the Caribbean Catastrophe Risk Insurance Facility), public sector governance help (via the European Union Solidarity Fund), macro-economic financial effects (by assessing international financial flows and investment decisions) and consequences to insurance uptake due to remote climate events (via increases in risk aversion of reinsurers). The experiences made with this approach are compared with the advantages and disadvantages of both storylines and probabilistic assessments and we provide ways forward for a unified approach.

Source: Ecological Economics

DOI: 10.1016/j.ecolecon.2025.108756

Authors: Stefan Hochrainer-Stigler, Jan Brusselaers, Qinhan Zhu, Max Tesselaar, Alessio Ciullo

Institutions: International Institute for Applied Systems Analysis, Vrije Universiteit Amsterdam, ETH Zurich

Language: English

Topic: Insurance and Financial Risk Management

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Climate action

Open Access status: hybrid

Estimated APC paid: $3,730