DOI: 10.55385/kastamonujes.1934783 ISSN: 2667-8209

The Role of the Insurance Sector in Climate Finance: Risk Transfer, Resilience, and Capital Allocation

Ahmet Codal
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Climate finance debates have traditionally centered on public budgets, development finance institutions, and capital markets, while the role of the insurance sector has remained comparatively underexamined in an integrated manner. Existing studies address insurance in relation to climate risk, catastrophe coverage, adaptation, investment, and financial governance; however, but these perspectives are seldom integrated into a unified climate finance framework. This review article examines the role of the insurance sector in climate finance through three core dimensions: risk transfer, resilience, and capital allocation. It argues that this tripartite structure captures the sector’s most climate-finance-relevant functions more coherently than fragmented categorizations because it reflects insurers’ role in providing financial protection against loss, shaping adaptive capacity and recovery, and directing long-term investment. The article further argues that risk pricing, modelling, and the production of climate information should not be treated as a standalone pillar, but rather as a cross-cutting function that supports and underpins all three dimensions. Reviewing the literature across climate adaptation, disaster risk finance, institutional investment, and insurance governance, the article identifies both the opportunities and structural limits of insurance-led climate finance. It concludes that the insurance sector can be understood as a strategically important but institutionally bounded actor within climate finance, especially in adaptation and resilience, whose contribution depends on supportive public policy, regulatory coordination, and layered risk-sharing systems.

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