This white paper explains how insurers can incorporate climate risk into strategic asset allocation using scenario analysis as a core framework. Because climate change is systemic, it affects portfolio risk and return through long‑term shifts in macroeconomic conditions and market dynamics. The paper highlights the need for forward‑looking modeling to capture how physical and transition risks influence asset performance over time. By embedding climate‑aware scenarios into allocation decisions, insurers can better assess uncertainty, strengthen portfolio resilience, and align investment strategies with evolving regulatory expectations, risk appetites, and long‑term sustainability objectives.

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