The cost of inaction is higher than the cost of transformation and adaptation
The headline that The Guardian chose to use for this article is “Climate crisis on track to destroy capitalism, warns top insurer.” I mean, if only.
But, of course, the reality is entirely the opposite way around: capitalism is destroying the climate. The only thing that provides some solace in this article is the realisation that people, organisations, and governments will be unable to get insurance, which will in turn put (positive) pressure on Net Zero targets.
At least, I hope that will be the case. Otherwise we’re going to have a Mad Max-style world on fire with lots of poverty and migration.
The world is fast approaching temperature levels where insurers will no longer be able to offer cover for many climate risks, said Günther Thallinger, on the board of Allianz SE, one of the world’s biggest insurance companies. He said that without insurance, which is already being pulled in some places, many other financial services become unviable, from mortgages to investments.
Global carbon emissions are still rising and current policies will result in a rise in global temperature between 2.2C and 3.4C above pre-industrial levels. The damage at 3C will be so great that governments will be unable to provide financial bailouts and it will be impossible to adapt to many climate impacts, said Thallinger, who is also the chair of the German company’s investment board and was previously CEO of Allianz Investment Management.
The core business of the insurance industry is risk management and it has long taken the dangers of global heating very seriously. In recent reports, Aviva said extreme weather damages for the decade to 2023 hit $2tn, while GallagherRE said the figure was $400bn in 2024. Zurich said it was “essential” to hit net zero by 2050.
[…]
No governments will realistically be able to cover the damage when multiple high-cost events happen in rapid succession, as climate models predict, Thallinger [on the board of Allianz SE, one of the world’s biggest insurance companies] said. Australia’s disaster recovery spending has already increased sevenfold between 2017 and 2023, he noted.
[…]
Many financial institutions have moved away from climate action after the election of the US president, Donald Trump, who has called such action a “green scam”. Thallinger said in February: “The cost of inaction is higher than the cost of transformation and adaptation. If we succeed in our transition, we will enjoy a more efficient, competitive economy [and] a higher quality of life.”
Source: The Guardian
Image: Mika Baumeister