The effects of climate change are increasingly noticeable, particularly those affecting economic activity. Economic scenarios representing the future possible states of economies are at the core of the regulatory calculations performed by insurance companies. This paper presents and discusses several methodologies that can be employed to integrate climate risk into the derivation of future scenarios of corporate spreads and probabilities of defaults. We discuss:

• A benchmark method
• A real-world approach based on Merton-Vasicek modelling
• A structural approach linking equities and credit spreads