“Extreme climate events are no longer marginal risks and the banking sector is slow to take stock of this.”

Faced with the increasing number of natural disasters, insurers have already sounded the alarm: climate change has become a major economic risk. Yet, the banking world continues to ignore the warning signs while massively financing fossil fuel industries. This paradox could precipitate a new global financial crisis, the outlines of which are already visible.

For several years, insurance companies have been warning: extreme weather events are no longer marginal risks, but rather a structural, unavoidable factor with systemic impacts. The continued rise in losses—floods, fires, storms—is forcing some to reduce or cease their operations in the most vulnerable areas, such as California and Florida. The banking sector, however, is slow to fully grasp this shift. While insurers absorb the shocks, banks could spread the effects.

Climate change is no longer just an environmental threat; it constitutes an unprecedented financial danger. Droughts, rising sea levels, heat waves, and hurricanes are causing lasting disruptions to the real economy. They affect harvests, destroy infrastructure, devalue real estate, and cause population displacement. These disruptions lead to loss of income, defaults, higher premiums, and, ultimately, growing instability in financial systems.

The year 2023 provided a new example: insured losses reached nearly $100 billion (€85 billion), for a total economic loss of $280 billion, according to reinsurer Swiss Re. In 2024, damages climbed further to $417 billion, of which $154 billion was insured, according to its counterparts Gallagher Re and Munich Re. In the United States, twenty-seven catastrophes each caused more than $1 billion in damages during a year 2024 marked by global heat records.

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