The insurance industry could lose billions of dollars because of climate change
Banking and insurance risk losing 10-15% of profits if climate risk management is not prioritized, according to the Bank of England (BOE).
According to the BOE’s Climate Stress Tests 2022 (climate stress tests), insurers are more vulnerable to climate change than banks, because of the increase in losses. damage from forest fires, inland and coastal flooding.
Insurers risk losing billions of dollars due to increased risks from climate change over the next 30 years. Image: Insurance journal
The BOE predicts that if fighting climate change is quicker and more decisive, the environmental damage to the banking and insurance industries could be around £209 billion ($263 billion). With a worst-case scenario where no additional measures are taken to reduce global temperature rise, these two industries will lose up to £334 billion in profits (about $421 billion) over the next three decades. .
“The negative impact of climate change is having a lasting effect on the profitability of banks and insurance companies, especially when they do not manage climate change risks effectively. Although, Models and scenarios vary from company to company and from bank to bank, but the overall annual profit loss rate is around 10-15%,” said BOE Deputy Governor Sam Woods.
Protest against financing fossil fuel projects in Europe. Image: Handelsblatt
Banks and insurers around the world are facing pressure to cut lending, provide insurance for fossil fuel and carbon-intensive projects to protect the environment. combat climate change. However, Mr. Woods said that cutting financing on these projects too quickly could backfire, with wide-ranging macroeconomic and social consequences, including a drop in energy prices. increased amounts – similar to the negative effects the world is experiencing recently.
In addition, policyholders also suffer a lot when insurance companies increase their premiums because of the increasing risk ratio.
The BOE is the first major central bank to conduct such a comprehensive climate risk stress test. Recently, a representative of the European Central Bank (ECB) revealed that the ECB is currently conducting a climate risk tolerance test among major banks. Results will be announced in July 2022.
Meanwhile, Jakob Gyntelberg, director of the European Banking Authority (EBA), said that by 2024, the European Union will also have a test of environmental and climate risk tolerance. for banks, insurance companies and investment enterprises.
Minh Lam (follow Handelsblatt)
at Blogtuan.info – Source: vnexpress.net – Read the original article here
