ABSTRACT
Insurance is under threat. The underwriting business of insurers is increasingly faced with growing exposure to physical risks, liability risks, and system-level risks caused or intensified by climate change and nature loss (Oxera 2024). The asset side of insurers is at the same time exposed to asset value loss caused by the same factors (EDHEC 2024). Opportunities shrink as insurance deserts expand and premiums increase (WWF 2026). Together, these factors lead to what this article calls a ‘climate squeeze’ that in time threatens the viability of the insurance sector. We discuss the exercise of subrogated damage claims against high emitters as a possible way to mitigate the damage for insurers.
Recovering a portion of climate damage from those whose emissions contributed to the damage is a fiduciary duty of the boards of insurance companies, in the financial interest of shareholders, who would otherwise bear the brunt of the damage in the short term, and to bolster the viability of the business of the insurance companies in the long term. It can help to (a) keep policyholder premiums lower, (b) limit system-level risks and physical risks for the insurance sector; (c) implement the ‘polluter pays’ principle instead of leaving the costs with insurers, and (d) in so doing mitigate the market failure underlying the climate crisis by internalizing the climate externality of unlimited emissions. Mitigating the market failure is economically efficient, makes clean energy more attractive, and accelerates the transition to a net-zero economy.
Kallenberg, Elieske and Nagel, Gerrit and Dolmans, Maurits, Can Insurers Use Subrogation to Escape the Climate Squeeze? (May 21, 2026).
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