Australia at risk of financial losses from climate change
Source: Middle East Insurance Review | Apr 2024
Australia has released its inaugural National Climate Risk Assessment report. According to the report, water resources, critical infrastructure, health and agriculture are among the priority areas that are at significant risk from climate change.
The 34-page first phase of the report released in March 2024 reveals that the country is likely to see an increase in the frequency and intensity of extreme weather events including wildfires, heatwaves, drought, coastal flooding and erosion, flooding and increased ocean temperatures. It identifies 56 nationally-significant climate risks facing Australia. Eleven risks have been assessed as priority risks and will be examined in detail in the second phase of work.
The priority risks cover the natural environment; primary industries and food; regional and remote communities; health and social support; infrastructure; defence and national security; communities and settlement; water security; supply chains; economy, trade and finance; and governance.
While climate economic volatility is hard to assess, it is likely to create macroeconomic shocks across the whole country. In a worst-case scenario, insurers and banks could withdraw from highly-exposed communities in response to extreme weather events.
“Financial system responses to climate change, including increased insurance premiums or reduced insurance availability, can have adverse impacts on households and businesses,” the report said.
“Such a shock in the local financial system may have cascading effects on infrastructure … potentially creating vulnerabilities in various communities with further potential flow-on impacts or pressures on other systems such as health and social support and primary industry and food.”
The government will also develop a National Adaptation Plan, which will establish a comprehensive framework for adapting to the nationally significant, physical climate risks identified in the National Climate Risk Assessment. M