Above, Australian Broadcasting (ABC).
Top insurers fear the climate crisis could soon outpace industry solutions, effectively threatening to make entire regions around the world uninsurable.
Günther Thallinger, a board member at Allianz, one of the world’s biggest insurers, recently outlined how the world is fast approaching temperature levels where insurers will no longer be able to offer cover for financial services, such as mortgages and investments.
In practice, this scenario implies some may face difficulty being able to afford home insurance cover, which is typically a prerequisite for getting a mortgage.
In a LinkedIn post published in late March, Thallinger made the case for rapid decarbonization, pointing out that entire asset classes were “degrading in real time” as extreme weather events take their toll. Perhaps most strikingly of all, he warned the worsening climate crisis appears to be on track to destroy capitalism.
Insurance, which is regarded as the invisible lubricant of the global economy, has a unique role to play in addressing climate-related risks. As professional risk managers, insurers routinely allow investors to take on calculated risks, protecting individuals and businesses against financial losses.
Thallinger, who is responsible for investment management and sustainability at Allianz, told CNBC that approximately two-thirds of economic losses from natural catastrophes are currently uninsured, indicating a “major societal problem.”
The so-called protection gap means that the financial burden of these disasters often falls on individuals, businesses and governments, rather than insurance firms.
“If this volume just grows even more, we simply have a societal situation that is not bearable anymore because it is just too much risk that is no longer covered,” Thallinger told CNBC by video call.
“The logic is not ours or mine. No, absolutely not. There are many people who are actually talking about how you cannot insure certain assets. It’s very, very difficult to deal with these assets as an investor.”
The warning comes at a time when the world is on course for a temperature increase of as much as 2.6-3.1 degrees Celsius this century, according to the United Nations, a level that would trigger “catastrophic” consequences for the planet.
Scientists have repeatedly warned that global average temperatures must be kept below 1.5 degrees Celsius to avoid the worst of what the climate crisis has in store.
This threshold is recognized as a crucial long-term target because so-called tipping points become more likely beyond this level. Tipping points can lead to dramatic shifts or potentially irreversible changes to some of Earth’s largest systems.
We can really talk about adaptation. How to build our infrastructure, our houses, our streets, our pipelines, our grids in such a way that they can withstand certain forms of weather phenomena. This is something that we can do with a very, very easy economic case behind it,” Thallinger said.
Allianz estimates that the cost of economic losses from natural catastrophes is typically around 10 times higher than the cost of adaptation, noting that this provides a clear economic incentive for policymakers to invest in preventative measures.
“If we continue, however, with the policies that we have out there, we are clearly on a pathway now of 2.7 degrees or 3 degrees where adaptation is simply not doable anymore. This is just what it is. We cannot protect Amsterdam from sea level rise of three meters. This is just not doable,” Thallinger said.
It’s not just Allianz’s Thallinger fearing the worst. Zurich Insurance Group, Europe’s fifth-largest insurer, said in April alongside a research paper assessing climate resilience that the outlook looks “alarmingly bleak.”
The Swiss insurer cited the Los Angeles wildfires at the start of the year as a stark reminder that even the world’s wealthiest economies are unprepared for the impact of increasing climate risks.
Zurich also found that global insured losses have grown at a much faster rate than the global economy over the past three decades.
“Perhaps most strikingly of all, he warned the worsening climate crisis appears to be on track to destroy capitalism.”
My god! Do you know what this means?
Destroying capitalism means destroying…*sob*…destroying shareholder value. How can humanity survive that?
Constant bullshit excuse for inaction, it is all China and India’s fault! Meanwhile da west outputs Multiple times GHG per capita than China and India. Oztrlia smugly maintains we contribute buggar all CGH to the global output, (which is true) so don’t have to cut back. Ignores the fact Oz is among the highest per capita emitter, as about #1 in the world. Bullshit Excuses. A bonnet bee of mine.
After watching the video I wanted to vomit. I live in Canada and we seem to always be pointing the finger at China and India. Like Australia, our per capita GHG emissions are more than twice that of China and India. If Canada’s population was 1.4 billion the planet would have been incinerated by now. Shake my head. We need to see more responsible and deeper thinking from our media and politicians.
Of recent years, Canada is a net exporter of > 3 million barrels per day (~4 MMbpd export – ~1 MMbpd import).
I try to remind people that I, like many Americans (and Canadians?), am responsible for a sizable personal chunk of carbon footprint from the Chinese factories which make many of the household products I buy. (I’m assembling a steel shelf from China today.)
Australia is a major coal exporter, too—over 300 Mt/year. It’s the largest exporter of coking coal (for steel) and the second largest exporter of thermal coal.
Munich Re called human caused global warming as the chief driver of increasingly asset loss in 2011. Central bankers, insurers and actuaries, never “treehuggers” have all called for immediate and entirely affordable reduction in human caused CO2 levels rather then a certain bankrupt future.
Thallinger called for saving capitalism not the planet in his trenchant linked in article.