Climate change is destroying capitalism, warns top insurer
Extreme temperature levels threatens insurers’ ability to provide coverage for climate risks. And without insurance, the financial sector will be unable to operate, which could mark the end of our economic system and civilization itself, warns a top insurer.
We are fast approaching such extreme temperature levels that insurers will no longer be able to offer cover for many of the climate risks and extreme weather impacts that are quickly becoming a reality due to climate change. And without insurance the financial sector will be unable to properly operate, and many financial services that we today take for granted, like mortgages and investments, will simply become unviable for many people and industries. And thus, the climate crisis is on track to destroy capitalism, warned Günther Thallinger, who is on the board of Allianz SE, one of the world’s biggest insurance companies, in a widely shared LinkedIn post.
“These extreme weather phenomena drive direct physical risks to all categories of human-owned assets—land, houses, roads, power lines, railways, ports, and factories. Heat and water destroy capital. Flooded homes lose value. Overheated cities become uninhabitable. Entire asset classes are degrading in real time, which translates to loss of value, business interruption, and market devaluation on a systemic level.
The insurance industry has historically managed these risks. But we are fast approaching temperature levels—1.5°C, 2°C, 3°C—where insurers will no longer be able to offer coverage for many of these risks. The math breaks down: the premiums required exceed what people or companies can pay. This is already happening. Entire regions are becoming uninsurable.
[…] The idea that market economies can continue to function without insurance, finance, and asset protection is a fantasy. There is no capitalism without functioning financial services. And there are no financial services without the ability to price and manage climate risk.”
And when global temperatures reach 3C above pre-industrial levels, it will be impossible to adapt to many climate impacts and governments will be under such heavy pressure and financial strain that they will be unable to provide financial bailouts, Thallinger warned.
Thallinger said that “capitalism must now solve this existential threat” and that the only path forward is to keep emissions out of the atmosphere by “burning less carbon or capturing it at the point of combustion”. Thallinger is hopeful capitalism can solve the climate crisis, because “we already have the technologies needed” to switch from fossil fuel economy to a zero-emission energy world by using solar, wind, battery storage, and green hydrogen, among other things.
“The only thing missing is speed and scale,” Thallinger said. “And the understanding that this is not about saving the planet. This is about saving the conditions under which markets, finance, and civilization itself can continue to operate.”
Personally, I’m not as hopeful as Thallinger in that capitalism will be able — or even is willing — to solve the climate crisis. After all, climate change is a direct result of capitalism. We need system change, not climate change.