Climate Risk Insurance Modelling for Australia's Future

Background: Understanding Stakeholder Expectations Amid Rising Climate Perils 

Australia’s financial regulators required robust tools to assess how physical and transition climate risks under different emissions and policy pathways impact the insurance sector’s affordability and accessibility.

With stakeholder expectations rising for ESG reporting, climate scenario analysis, and alignment with ASRS and GRI standards, regulators needed economic insights that go beyond generic reporting.

Challenge: Aligning Scenario Planning with Disclosure Requirements and Net Zero Goals

Climate scenario modelling must be precise, geographically granular, and grounded in recognised sustainability reporting standards. The challenge was to assess insurance sector vulnerabilities under two divergent scenarios:

• A Delayed Transition (net zero transition starting after 2030)

• Current Policies (no further mitigation beyond existing regulations)

This required integrating climate science, economic forecasting, and detailed regional data to meet evolving ESG reporting and stakeholder expectations.

Solution: Delivering ESG Reporting Tools through Climate Scenario Analysis and Income Forecasting

Oxford Economics Australia addressed these needs by delivering:

• Macroeconomic modelling across three scenarios (Delayed Transition, Current Policies, Counterfactual)

• Downscaled household income projections at national, state, and SA2 regional levels

• Sector-specific impacts for emissions-intensive industries (coal, livestock, manufacturing, agriculture)

• Integration of climate scenario analysis into GVA, inflation, employment, and insurance affordability projections

• Use of internationally recognised frameworks, including NGFS-aligned climate scenario narratives and tailored GRI-aligned sustainability reporting

Impact for the Customer (APRA and CFR)

• Informed policymaking on climate risks to insurance affordability
• Enabled alignment with global sustainability reporting standards (GRI, ASRS, SFDR)
• Provided granular, geographically relevant income data to assess reinsurance likelihood and access to insurance under worsening climate scenarios
• Supported transparency in stakeholder communication and climate disclosure requirements

Download the report