Climate Risk and Insurance - Raghavendra Rau

00:00 // Introduction: Climate Risk, Geopolitics & Finance Explained 02:25 // Two Families, One Hidden Problem: Insurance & Energy Shocks 03:00 // The Core Issue: How Risk Is Priced in Modern Markets 03:25 // The Magic of Insurance Pooling & The Law of Large Numbers 09:00 // How Energy Suppliers Hedge Risk (And Why It Failed) 11:00 // What Happens When Risk Becomes Correlated? (Domino Effect) 14:45 // Real-World Example: UK Storms & £500M in Claims 15:40 // The 2021 Energy Crisis & Supplier Collapses Explained 18:10 // Thin Capital Buffers & Why Companies Go Bankrupt 21:20 // Climate Change = Correlated Weather Risk 23:30 // Why “1-in-100-Year” Models No Longer Work 25:00 // Geopolitical Risk: Russia, Gas & Energy Price Spikes 27:00 // The Climate–Geopolitics Feedback Loop 30:50 // Climate Tipping Points & Sudden System Shocks 34:30 // The Sulfur Paradox: Clean Air, Faster Warming? 37:00 // Geoengineering Risks & Global Conflict Scenarios 41:40 // Insurance Crisis: California, Australia & UK Flood Zones 46:20 // UK Energy Market Collapse & Who Paid the Cost 48:30 // Solutions: Resilience, Parametric Insurance & Catastrophe Bonds 55:00 // Policy Choices: Pricing Risk Fairly in a Correlated World Watch the Q&A session here: Q&A: Climate Risk and Insurance - Raghave... Why did coastal homeowners lose insurance while UK energy bills spiked after Russia’s invasion? Because risks started moving together. In this lecture, I show how climate extremes and geopolitics create synchronized shocks that overwhelm insurers and energy suppliers, pushing up premiums and bills. I discuss the basics of risk pooling, why it breaks under correlation, and what realistic fixes look like—from parametric policies and better building standards to smarter hedging and targeted support. This lecture was recorded by Raghavendra Rau on the 18th of February 2026 at Barnard's Inn Hall, London Raghu is the Mercers School Memorial Professor of Business He is also the Sir Evelyn de Rothschild Professor of Finance at Cambridge Judge Business School. The transcript of the lecture is available from the Gresham College website: https://www.gresham.ac.uk/watch-now/c... Gresham College has offered free public lectures for over 400 years, thanks to the generosity of our supporters. There are currently over 2,500 lectures free to access. We believe that everyone should have the opportunity to learn from some of the greatest minds. To support Gresham College's mission, please consider making a donation: https://www.gresham.ac.uk/get-involve... Website: https://gresham.ac.uk X: https://x.com/GreshamCollege Facebook: Facebook: greshamcollege Instagram: Instagram: greshamcollege Bluesky: https://bsky.app/profile/greshamcolle... TikTok: TikTok: greshamcollege Support Us: https://www.gresham.ac.uk/get-involve...