Insurers Worry a Financial Crisis May Come From Climate Risks

https://www.bloomberg.com/news/articles/2019-02-22/insurers-worry-a-financial-crisis-may-come-from-climate-risks

By William Wilkes
February 22, 2019, 8:33 AM EST

Insurers are increasingly worried that rising temperatures will lead to a slump in property values that could spark broader financial turmoil.

Those were the conclusions a group run out of the University of Cambridge including some of the world’s biggest insurers. In a report published Friday, ClimateWise said that an increasing catastrophes linked to climate change could triple losses on property investments over the next 30 years.

The warning adds to concerns raised by Munich Re AG last month, which said a string of floods, fires and violent storms had doubled the normal amount of insurable losses. Munich Re has said global climate-related losses may have topped a record $140 billion last year.

“A failure to take account of these risks could be damaging both for individual investors and lenders, but also for the financial system and economy as a whole,” according to the 74-page report, which was written on the behalf of ClimateWise members including Allianz SE, XL Group, Aviva Plc and Lloyds Bank Plc.

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While scientists are cautious to link any single weather event to global warming, they’ve built consensus around the probability that more powerful floods, fires, droughts and storms will occur with higher frequency as the Earth gets hotter.

“Massive wildfires appear to be occurring more frequently as a result of climate change,” to Munich Re board member Torsten Jeworrek said. He adding investors should look again at whether they’ve properly accounted for rising damages from weather catastrophes.

The German insurer reported $160 billion of losses from natural catastrophes last year, some $20 billion above inflation-adjusted averages in the previous three decades.

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The predictions come amid signs that global warming is causing noticeable dents in some of the world’s largest and most sophisticated economies.

A protracted drought in Germany that made crucial waterways impassable to ships shaved around 2 percentage points off growth in Europe’s largest economy in the fourth quarter of 2018. Wildfires in California caused the first major corporate casualty of climate change, with utility PG&E collapsing due to a $30 billion liability from two years of fires.

Extreme weather events are the most threatening global risks this year, the World Economic Forum said in a report published January.

The U.S Defense Department last month warned climate change could compromise U.S. security, with rising seas increasing flood risk to military bases and drought-fueled wildfires endangering those inland. In December, the Bank of England said it would force banks to make better preparations for climate change after finding only a few had done so.

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