Concern is growing that climate-driven physical risk is no longer just an underwriting issue, but a potential systemic financial risk with implications for infrastructure finance and real asset markets, according to recent report.

As well, individual insurers rate their own preparedness above the industry’s, finds MSCI Institute’s What the Market Thinks: How Global Insurers are Responding to Rising Physical Risk report, which surveyed 50 of the world’s largest property and casualty insurers and reinsurers ( 24% from the Asia-Pacific region ), about the growing impact of extreme weather and physical hazards.

Across regions, insurers assess their own preparedness more favourably than the sector’s overall readiness, the report finds, with 62% in North America, 50% in Asia-Pacific and 46% in Europe saying the industry is unprepared overall, indicating perceived system-wide vulnerabilities beyond individual firms’ actions.

Concern about systemic risk is nearly universal, the report notes, but operational integration lags. All surveyed Asia-Pacific insurers report moderate to very high concern about physical risk creating systemic financial risk ( versus 88% globally ).

Notably, 100% of Asia-Pacific insurers express high concern about infrastructure insurability in vulnerable regions ( 4 percentage points above the global average ).

As well, Asia-Pacific shows the widest awareness–integration gap: while 64% express high concern, 63% remain at early or intermediate stages of integrating systemic risks into risk management frameworks.

Advisory services, the report points out, present the clearest opportunity, with 91% of insurers globally seeing opportunities in climate risk and resilience advisory services, compared with 75% in Asia-Pacific.

In addition, 58% globally cite parametric products as a key opportunity, the same share as Asia-Pacific; and 11% globally view insuring nature-based resilience as a significant opportunity, Asia-Pacific is higher at 17%.

Near-term scenarios, the report shares, matter more for underwriting, with 43% globally say underwriting is meaningfully informed by physical-risk scenario analysis, compared with 41% in Asia-Pacific. Nearly all insurers find scenarios through 2030 more actionable for underwriting than longer-term horizons.

Physical risk, the report reveals, is rising on the regulatory agenda. Supervisors are increasingly focusing on insurers’ governance and risk management, with growing requirements to assess hazard-related scenarios and climate risks in risk, solvency, capital planning and disclosure.

The maturity of physical-risk integration, according to the report, varies regionally, with 68% of European insurers having integrated physical risk into overall risk management, versus 36% in Asia-Pacific and one-third in North America.

In addition, 79% in Europe say underwriting is well prepared for rising physical risk, compared with 23% in Asia-Pacific and 23% in North America.

As well, governance oversight, the report states, exists but accountability remains weak, with 69% of insurers globally saying they do not integrate climate considerations into executive performance or incentives. This includes 63% in Europe, 85% in North America and 67% in Asia-Pacific.