Business

By Pesach Benson • November 4, 2025

Jerusalem, 4 November, 2025 (TPS-IL) — While rising temperatures and severe storms strain homeowners’ insurance worldwide, an Israeli study suggests the industry could go beyond reacting to these risks and play a leading role in combating climate change, Tel Aviv University announced on Tuesday.

The research, published in the peer-reviewed Humanities and Social Sciences Communications, examined the expected impact of climate change-driven hurricanes on U.S. homeowners’ insurance profitability. The study was conducted by a joint team from Tel Aviv University, Max Stern Yezreel Valley College, and the University of Haifa, including PhD student Moran Nabriski and Prof. Colin Price of Tel Aviv University, and Dr. Ruslana Palatnik from the University of Haifa.

Insurance is a major economic force with a dual role. It manages risk, but it also acts as a long-term institutional investor with significant capital. The study argues that, because the sector fundamentally pools risk across the Economy, insurers could take a more active role in climate mitigation.

“Insurance is commonly viewed as a tool for transferring risk over time and across geographies, yet natural disasters occur in the same places at the same time,” said Nabriski. “As natural disasters intensify, the insurance industry should represent the Economy not only as a responder to a changing climate, but also as a leader in confronting it. Because insurance connects all sectors of the Economy, it can leverage that position into a coordinated effort with a meaningful impact on climate risk.”

Using a market-equilibrium model combined with projections of hurricane damage, the researchers estimated that U.S. homeowners’ insurers could see profitability decline by roughly 11%–100%, depending on the scenario. Such losses would also likely translate into higher premiums and reduced coverage, creating ripple effects across the housing market.

Rather than absorbing these losses passively, the study proposes channeling the expected erosion into emissions-reduction investments. The researchers suggest that this strategy would allow the insurance industry to pool resources across the Economy and amplify its impact, potentially exceeding the sector’s direct economic footprint.

The research provides a quantitative framework for evaluating future costs and demonstrates how insurers’ long-term capital could function as a climate-finance engine alongside traditional pricing and risk management.

“By linking projected losses to proactive mitigation, insurers can shift from being mere responders to natural disasters toward being active participants in shaping a more resilient economic future,” Price said.