Climate Change Drives $600 Billion in Insurance Losses
New York, Tuesday, 10 December 2024.
New research highlights that human-caused climate change has resulted in $600 billion in insurance losses due to increased frequency and severity of natural disasters.
Impact on Global Insurance Markets
According to a groundbreaking report released on December 9, 2024, human-caused climate change accounts for approximately one-third of all weather-related insurance claims this century [1]. The analysis reveals that climate-attributed losses have escalated significantly, increasing from 31% to 38% of all weather-related losses over the past decade [1][4]. In 2022 alone, $52 billion of the total $132 billion in weather-related losses were directly attributed to climate change [1].
Current Industry Challenges
The insurance sector faces mounting pressure as climate-related losses continue to surge. In 2023, 28 major insurers reported climate-attributed losses of $10.6 billion, nearly equivalent to the $11.3 billion in premiums they collected from corporate fossil fuel clients [1][4]. For European insurers including Allianz, AXA, Aviva, and Zurich, climate-related losses of $3.23 billion exceeded their fossil fuel premiums of $2.20 billion [4]. This financial strain has led to insurers withdrawing from high-risk regions, prompting Swiss Re to urge countries to increase their investment in greenhouse gas reduction measures [1].
Impact on Homeowners
The effects of climate change are directly impacting homeowners through dramatically increasing insurance costs. Since the Great Recession, homeowners insurance prices have surged by 74%, while home prices have risen over 40% when adjusted for inflation [5]. The situation has become particularly acute in recent years, with real premiums rising approximately 20% from 2020 to 2023 [5]. This trend has led to concerning coverage gaps, with data showing that 12% of homeowners currently lack insurance coverage [5].
Future Outlook and Industry Response
Insurance experts warn of a potential ‘doom loop’ where escalating climate impacts lead to financial instability [1]. Dr. David Marlett of Appalachian State University’s Brantley Risk & Insurance Center emphasizes that traditional insurance models are struggling to sustain these escalating risks [2][3]. In response, more than two-thirds of states have established Fair Access to Insurance Requirements (FAIR) plans as insurers of last resort [5]. Industry leaders stress that the insurance sector must embrace its role in accelerating the transition to clean energy while developing more resilient systems to manage these growing risks [1].