Insurance companies worry that the world may soon become uninsurable

Top insurance companies worry Climate crisis It will soon surpass industry solutions and effectively threaten to make the entire region around the world uninsurable.

GüntherThallinger, Board Member AllianzRecently, one of the world’s largest insurers recently outlined how the world quickly approaches temperature levels, and insurers will no longer be able to insure financial services such as mortgages and investments.

In LinkedIn postal Thallinger, published in late March, proposed cases of rapid decarbonization, noting that the entire asset class was “reduced in real time” due to huge losses caused by extreme weather events. Perhaps most notably, he warned that a worsening climate crisis seemed to be expected to destroy capitalism.

Insurance is Believed As an intangible lubricant for the global economy, it plays a unique role in addressing climate-related risks. As professional risk managers, insurers often allow investors to take calculated risks, thus protecting individuals and businesses from financial losses.

Thallinger, who is in charge of Allianz investment management and sustainability, told CNBC that there is currently no insurance and about two-thirds of economic losses in natural disasters are “a major social problem.”

The so-called protection gap means that the economic burden of these disasters usually falls on individuals, businesses and governments, not on insurance companies.

“If this volume grows bigger, we have only one social situation that is no longer intolerable because it no longer covers too many risks,” Thallinger told CNBC via video call.

“Logic is not ours or mine. No, absolutely not. There are a lot of people who are actually talking about how you secure certain assets. It’s very, very difficult to deal with these assets as an investor.”

According to this century, the warning is when the world is of course going to rise by 2.6-3.1 degrees Celsius. United Nationswhich will cause “catastrophic” consequences of the planet.

Scientists have Repeated warnings Global average temperatures must be kept below 1.5 degrees Celsius to avoid the worst-case scenario of a climate crisis.

This threshold is Acknowledgement As a crucial long-term goal, as the so-called critical point becomes more likely to exceed this level. The critical point may lead to a dramatic shift or Potential irreversible changes to some of the largest systems on Earth.

“We can really talk about adaptation. How to build our infrastructure, houses, streets, pipelines, our grids so that they can withstand certain forms of weather phenomena. This is what we can do with the very, very simple economic case behind it,” Thallinger said.

Allianz estimates that the economic cost of natural disasters is usually 10 times higher than the cost of adaptation, noting that this provides policymakers with clear economic incentives for policy makers to invest in preventive measures.

“But if we continue to exist the policy, then we are obviously on the path of 2.7 degrees or 3 degrees, and adaptability is simply no longer feasible. That’s it. We can’t protect Amsterdam from three meters of sea level rise. It’s impossible,” Thallinger said.

It’s not just Allianz’s Thallinger who is worried about the worst. Zurich Insurance Groupthe fifth largest insurance company in Europe, explain In April, a research paper assessed the viewpoints that looked “shockingly bleak.”

Swiss insurance company quoted Los Angeles Wildfire At the beginning of the year, it was a clear reminder that even the world’s wealthiest economies are not ready for the impact of increasing climate risks.

Zurich also found that global insurance losses have grown much faster than the global economy over the past three decades.

Zurich said after inflation adjustment that average insurance losses grew by 5.9% per year between 1994 and 2023, while global gross domestic product (GDP) increased by 2.7% per year during the same period. The results show that insured losses have more than doubled over the past 30 years compared to global growth.

Zurich Insurance Group (Zurich Insurance Group) explain On paper. “This, in turn, will affect the level of protection that individuals and businesses are willing and able to buy and have a potential impact on the overall functioning of the market.”

For insurance companies and reinsurers, the severity and frequency of extreme weather events increase with Astronomical growth In the disaster bond market.

The so-called Cat Bond was first created in the 1990s and is a financial instrument designed to raise funds for insurers in the event of natural disasters, such as hurricanes or earthquakes.

Swiss RE, the world’s leading reinsurer, said in a recent report that the cat bond market has grown by 75% since the end of 2020, noting that there is little sign of a slowdown in this trend.

However, for Allianz’s Thallinger, the climate crisis could drive a long-term relationship between greater risks and more businesses of insurers. At some stage, he said, this could have an impact on financial markets.

Steve Evans, owner and editor of expert data provider Artemis.bm, warns that the insurance industry will not only continue to suffer economic losses from natural disasters.

“Unless resilience is added and protection is done, the more impact a disaster is, the more expensive its insurance will be. Honestly with you, it can be a terrible spiral.”

“If the losses keep escalating, it’s just uneconomical for insurers and reinsurers and even the capital market.