Insurance Companies' Responses to Climate Change: Adaptation, Dynamic Capabilities and Competitive Advantage

Drawing on the dynamic capability view, we analyse how insurers adapt to climate change impacts and how adaptation relates to corporate financial performance. Based on a comprehensive literature review, we deduce seven categories of adaptation measures associated with three dynamic capability dimensions of climate change adaptation (i.e. climate knowledge absorption, climate-related operational flexibility and strategic climate integration). Using this framework, we conduct a content analysis of insurers' adaptation efforts as reported to the Carbon Disclosure Project. Regression analysis reveals positive relationships between climate knowledge absorption and return on assets (ROA), climate-related operational flexibility and ROA, and between the total number of adaptation measures and ROA.