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Page history last edited by PBworks 16 years, 2 months ago

Financial Impact of Climate Change


The UK Treasury recently commissioned a high profile review of the economic impact of Climate Change - the Stern Review, available here:



This report estimated that:


  • Extreme weather could reduce global gross domestic product (GDP) by up to 1%
  • A two to three degrees Celsius rise in temperatures could reduce global economic output by 3%
  • If temperatures rise by five degrees Celsius, up to 10% of global output could be lost. The poorest countries would lose more than 10% of their output
  • In the worst case scenario global consumption per head would fall 20%
  • To stabilise at manageable levels, emissions would need to stabilise in the next 20 years and fall between 1% and 3% after that. This would cost 1% of GDP


In a directly insurance context, in an extremely detailed and widely cited paper published in 2005 titled "Financial Risks of Climate Change" and available here



the ABI (Association of British Insurers) estimated that:


Under the so-called High Emissions scenario developed by the 3rd Intergovernmental Panel On Climate Change (IPCC) Report, which estimated a doubling of carbon dioxide concentrations by 2080:


  • Average insured losses from US landfalling Atlantic Hurricanes, Japanese typhoons and European windstorms could increase by $6Bn a 65% increase above the current figure of $9.5Bn
  • Insured wind-related lossses from extreme (1 in 100 to 1 in 250 year) US hurricanes could increase by $41-62Bn above present day losses, a 70-75% increase on current levels of $60-85Bn
  • Insured wind-related lossses from extreme Japanese typhoons could increase by $10-14Bn above present day losses, a 67-70% increase on current levels of $15-20Bn
  • Annual costs of flooding in the UK could increase by almost 15-fold, leading to potential total losses from river, costal and urban flooding of more than $40Bn


(all the above figures are in 2004 prices and are based only on a projected increase in windspeeds of cyclones and frequency of European storms. They ignore the current socio-economic trends such as increased costal development and rising asset values which substantially increase exposure to extreme storms)

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