As the risk landscape shifts because of climate change, fluctuating population distributions and rising inequalities, there is now an opportunity for governments to partner with the (re)insurance market and put its expertise to work.
Climate change poses a major risk – one that is already impacting the lives and finances of many. The latest Global Risks Report from the World Economic Forum released in January 2020, only confirms its critical importance. The impact of climate change is global, and with far reaching consequences. Events such as the bankruptcy of the Pacific Gas and Electric Company (PG&E) in January 2019, the historic water shortages in South Africa and the recent announcement by the Indonesian government to move its capital from Jakarta, all illustrate that the impact is also directly financial, according to Oliver Wyman Risk & Finance Partners David-Howard Jones and Wolfram Hedrich, Consultant Ethan Paul and Marsh & McLennan Advantage Insights Research Manager, Jaclyn Yeo. Oliver Wyman is an affiliate of Guy Carpenter.
Climate change is one of the most — if not the most — pressing challenge of our times. There are wildfires raging in the Amazon, California and Australia. Thousands of people have been displaced. Homes have been lost. Species pushed to the brink of extinction. Corporations bankrupted. Large swathes of vegetation destroyed. Sea levels continue to rise alarmingly. And this is to name just a few consequences already experienced. There is also the imminent possibility of more wildfires, student protests and the growth of movements like ‘extinction rebellion’ that can stem from the direct impacts of climate change.
Climate change will put at risk around 2 percent of global financial assets by the year 2100. A worst-case scenario could see up to 10 percent of global financial assets being at risk by 2100. Such is the scale of the devastation that people should be ready for – and preparations need to accelerate now.
Guy Carpenter is well-placed to advise clients on responding to climate change risk. We have multiple experts in atmospheric and climate science across the globe that have been actively researching and consolidating the scientific literature. Our solutions can help clients make informed decisions about pricing, capital and risk management strategies.