Allianz Executive Raises Alarm Over Uninsurable Climate Risks

The Allianz Group's board member has issued a stark warning regarding the escalating risks posed by climate change, emphasizing that a world plagued by extreme weather events is becoming increasingly uninsurable. The warning comes amidst a surge in incidents such as wildfires, floods, and storms, which threaten to trigger far-reaching economic and societal disruptions.

Günther Thallinger, a key figure at Allianz, expressed his concerns on LinkedIn, highlighting that many climate-related risks may soon become unaffordable to insure. He pointed to alarming trends already observed in regions like California, where insurers are retreating from certain areas due to the heightened risk of wildfires. Following devastating fires in 2017 and 2018, some insurers ceased to offer new policies or renew existing ones, resulting in significant financial repercussions.

According to analysis from Moody's, the current wildfire crisis in California is projected to cost around $20 billion, impacting major insurance companies including Allstate, Travelers, and Chubb. Meanwhile, Munich Re reports that natural disasters in 2024 caused global damages estimated at approximately $320 billion, with only about $140 billion of this amount insured.

Thallinger cautioned that as global temperatures rise towards critical thresholds of 1.5°C, 2°C, and even 3°C, many insurance providers will find it increasingly difficult to cover numerous risks. This situation could lead to a domino effect where the lack of insurance coverage makes financing options like mortgages and investments unsustainable.

Research from Berkeley Earth indicates that 2024 was the hottest year on record, with global temperatures averaging 1.62 degrees Celsius above pre-industrial levels. The implications of this warming trend extend beyond insurance; they threaten various sectors, including agriculture, infrastructure, construction, and industry. Thallinger predicts that this could result in significant credit shortages linked to climate risks, with entire regions, particularly coastal and arid areas, facing a gradual loss of financial viability.

The Allianz executive also highlighted the broader geopolitical factors contributing to climate change, noting that a temperature increase of between 2.2°C and 3.4°C is becoming increasingly likely. At a 3°C rise, the damages would exceed the capacities of both governments and insurers to manage. For instance, Australia's expenditures on disaster relief have multiplied sevenfold from 2017 to 2023, with approximately EUR549 million allocated for disaster management in 2024 alone. In contrast, Germany allocated around EUR570 million for similar purposes.

Thallinger's views resonate with those of Nick Robins, chair of the Just Transition Finance Lab at the London School of Economics. Robins stressed that Thallinger's analysis should spur urgent action to protect vulnerable populations, particularly in the Global South, who bear the brunt of climate-induced disasters despite contributing the least to the crisis.

Data from the environmental and development organization Germanwatch reveals that nearly 800,000 individuals lost their lives due to natural disasters between 1993 and 2022, with global economic damages amounting to about $4.2 trillion--an amount projected to increase significantly by 2050. While developed nations like the U.S., Italy, and Spain are indeed affected, those in the Global South have far fewer resources to prepare for climate-related risks.

In the U.S., the current administration has taken a contrary approach, with President Trump withdrawing from the Paris Agreement and dismissing human-induced climate change. This stance could potentially raise global temperatures by up to 0.1°C by 2100, according to climate researchers, leading to severe long-term consequences.

Thallinger concluded by asserting that the costs associated with inaction on climate change will outweigh those of transformation and adaptation. He argued that successful transition efforts could yield a more efficient, competitive economy and improved quality of life.