5.4, topic I

Climate change risk management and regulation of services

Climate change brings about a new set of major economic risks arising from changing weather patterns, extreme weather events and rising sea levels. One adaptation solution that is rapidly gaining support of countries and international donors is a risk transfer to the global reinsurance and capital markets.

The ability of a business to manage the risk of extreme weather events on production and the value of its assets which are used as security for loans is of key interest to banks and insurance plays an important role. The insurance sector has begun to factor impacts of climate change into premiums.
This project identifies services relevant to climate change adaptation and examines the implication of, and for, regulating trade in services in GATS and the WTO.


Atmospheric events are faced by everyone at the same time in the same region. This reduces the potential benefit of any mutual risk-sharing agreement. A possible solution could be to share risks internationally (Fourth Assessment Report, IPCC 2007). Literature published so far, only determines that climate change will have huge impacts on the insurance industry. However, it is important for regulators to determine how well prepared the industry is for the challenges of climate change and to what extent the regulation of international trade in different financial services, such as insurance, could foster climate change adaptation.

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