Natural disasters pose huge risks for global financial sector, UN report warns

Climate change-driven natural disasters have the potential to wreak havoc across the world's stock markets and financial centres, and too few financial companies are taking seriously the risks and opportunities posed by extreme weather events, a new report released today by the United Nations Environment Programme (UNEP) warns.

"The increasing frequency of severe climatic events, threatening the social stability or coupled with significant social costs, has the potential to stress insurers, reinsurers and banks to the point of impaired viability or even insolvency," the report, Climate Change and the Financial Services Industry, says.

According to the report, which was released by the UNEP Finance Initiatives, a partnership between the agency and 295 banks, losses as a result of natural disasters appear to be doubling every decade and have reached $1 trillion in the past 15 years. Annual losses, in the next 10 years, are projected to reach close to $150 billion if current trends continue.

The massive economic losses stemming from the devastating summertime flooding in central Europe are in line with the kinds of increasingly severe weather events anticipated by scientists as a result of human-induced climate change. This year has also seen a failure of the monsoon in Asia, dramatic forest fires in the United States and the onset of another El Niño event in the Pacific.

"This report is a wake-up call for the global financial community. It highlights the real risks and economic perils they are facing as a result of human-influenced climate change," UNEP Executive Director Klaus Toepfer said. "It also underscores how, given the financial muscle available to them, these institutions could move markets and minds to deliver a cleaner, healthier and less vulnerable world for the benefit of the world economy, for the benefit of people everywhere."