7Stress testing

Banks and insurers generally make money in two ways, investing the capital that they are holding and retaining payments from their customers. A major economic shift, such as a transition to a low-carbon economy, could have major implications on their investments. Major physical changes in the world’s climate system could increase the frequency and severity of weather-related catastrophes. The frequency and severity of these catastrophes has important implications for the financial sector, in particular for the underwriting of insurance premiums and for the lending of capital for residential and commercial ...

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