The news this week has been dominated by natural disasters, with floods in The US and Pakistan coming at a time when Munich Re delivered its analysis that found the economic costs of natural disasters last year were $270 billion, less than half of it insured.
Member of the reinsurer’s Board of Management, Thomas Blunk warned the costs and scale of natural disasters were alarming and prevention and protection needed to be pushed up the corporate and governmental agenda.
“Climate change is taking an increasing toll,” he explained. “The natural disaster figures for 2022 are dominated by events that, according to the latest research findings, are more intense or are occurring more frequently. In some cases, both trends apply. Another alarming aspect we witness time and again is that natural disasters hit people in poorer countries especially hard. Prevention and financial protection, for example in the form of insurance, must therefore be given higher priority.”
However while insurers are growing increasingly concern over the future impact of climate change and the need to mitigate the threat, business leaders are taking a far more short-term view if the latest World Economic Forum’s Global Risk Report 2023.
The report asks 1200 business leaders to rank the major threats to their business and their overall concerns, now, in two years’ time and in a decade.
While failure to mitigate climate change, failure to adapt to climate change, and natural disasters and extreme weather events were the top three risks for 2033, looking to 2023 the results were starkly different.
In the short terms the cost of living crisis came out as the top risk for business leaders with geoeconomic confrontation third, with natural disasters recognised as the second most pressing risk with failure to mitigate climate change fourth in the list of short term concerns.
The view has not been helped by comments from the chair of the US Federal Reserve, Jerome Powell who indicated that central banks should not be meddling in climate issues at a time of economic crisis
Speaking in Sweden at the Symposium on Central Bank Independence, Powell said the Fed should “stick to our knitting” and “not wander off to pursue perceived social benefits that are not tightly linked to our statutory goals and authorities”.
He said that pursuing goals, “however worthy,” without a statutory mandate would “undermine the case of our independence”.
It has prompted the WEF and the insurance market to warn businesses that they simply cannot afford to put their efforts to tackle climate change on the back burner.
“The short-term risk landscape is dominated by energy, food, debt and disasters. Those that are already the most vulnerable are suffering – and in the face of multiple crises, those who qualify as vulnerable are rapidly expanding, in rich and poor countries alike. In this already toxic mix of known and rising global risks, a new shock event, from a new military conflict to a new virus, could become unmanageable. Climate and human development therefore must be at the core of concerns of global leaders to boost resilience against future shocks,” said Saadia Zahidi, (pic) managing director, World Economic Forum.
Editor, Emerging Risks