Exploring the Impact of Extreme Weather on Insurers' Willingness to Cover

In recent years, with the increasing risk of extreme weather, Insurance companies and their customers are facing a crisis. How to reduce extreme weather risk and achieve sustainable and healthy development of the insurance system is of great significance. Firstly, a key index refers to the Extreme Weather Risk Index. We calculated the Extreme Weather Risk Index for six major global population clusters using AHP and TOPSIS methods. We analyze the trade-off between underwriting and insurance from the perspectives of insurance companies and customers. From the insurance company's standpoint, we employ a logistic regression model to evaluate their willingness to underwrite policies in various regions, leading to the conclusion that as risk levels rise, their inclination to underwrite decreases. From the customers' standpoint, we conducted K-means++ cluster analysis to determine the rating divisions for extreme weather risk levels in each country. Analyzing the impact of customer priorities on insurance decision-making reveals that higher risk levels correspond to increased willingness to obtain insurance. This study innovatively constructs an extreme weather risk index, which overcomes the shortcomings of previous studies in the quantitative assessment of risk; at the same time, it quantitatively analyses the relationship between extreme weather and insurers' willingness to underwrite insurance, and provides reference for insurers' underwriting decisions from the perspective of customers' credit, which makes up for the gap of previous studies that have not fully considered the impact of customers' credit perspective on underwriting decisions, and provides more valuable decision-making basis for the insurance industry in dealing with the risk of extreme weather.