Physical Risk is natural disasters. Insurer and reinsurer are particularly exposed to these effects. Their investment assets can be impacted if storms, floods, and earthquakes affect real estate in their portfolio.
Transition Risk is trade-off reaction or change by shifting towards low-carbon economy.
Transaction Risk includes 1) Policy risk (new regulation and standard) 2) Legal risk (lawsuits from entities), and 3) Technology risk (disrupting established industry).
Both of these risks have impacts on business and financial activities.
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