According to Swiss Re, a major insurance provider, climate change could take 11-14% off the world economy by 2050, amounting to as much as USD$23 trillion.
What is Happening?
- A report published by Swiss Re, one of the world’s largest providers of insurance to other insurance companies, has found that rising temperatures due to climate change are likely to reduce wealth and the world economy significantly by mid-century as crop yields fall, diseases spread and rising seas inundate coastal cities.
- The climate crisis will affect the insurance giant’s way of doing business with the chief economist of Swiss Re, Jerome Jean Haegeli saying, “For hazards where confidence of a direct link with global warming is medium/high, such as heat waves, wildfires, droughts and torrential rainfall, we are adjusting our pricing model.” The projections could also influence investments by Swiss Re and other insurance companies.
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- If countries succeed at keeping temperature rise below 2 degrees Celsius, economic losses by 2050 would be marginal, with most countries’ economies experiencing no more than 5% in losses than would otherwise be the case. However, current emission levels take the planet far beyond this threshold. Current trajectories set the planet on a path for global temperatures to increase as much as 2.6 degrees Celsius by 2050. According to the report, if this happens, the US economy would shrink 7%, while other wealthy countries like Canada, Britain and France could lose between 6% and 10% of their potential economic output.
- However, the results for poorer countries, which tend to be more exposed to warmer temperatures but have less resources to adapt, would be far more dire. The report says that even if the increase in global temperature is held to 2 degrees, Malaysia, the Philippines and Thailand would each see economic growth 20% below what they could otherwise expect by 2050. At 2.6 degrees increase, each country would have one-third less wealth than would otherwise be the case.
- Further, if the global temperature increased by 3.2 degrees, the “severe case” for temperature gains in the report, levels of wealth in Malaysia, the Philippines and Thailand would drop almost by half compared with a world with no climate change. The economy of Indonesia would be 40% smaller, while India’s would be 35% smaller.
- The growing financial exposure of insurance companies to the climate crisis is already having an impact on high-risk places, such as those that regularly suffer from flooding or hurricanes. Already, the US government implemented a new pricing structure for flood insurance, charging higher prices for the most flood-prone homes, while in California, homeowners in areas that are especially exposed to wildfires increasingly struggle to get insurance.