Action is needed on climate change: Mark Carney

The Bank of England governor, Mark Carney, has claimed that the need to manage mega risks is “as important as ever.”

Carney made the statement in a speech on climate change at Lloyd’s of London titled Breaking the tragedy of the horizon – climate change and financial stability.

He said that changes in the climate are having a huge effect on both insurers and the economy.

“Alongside major technological, demographic and political shifts, our very world is changing. Shifts in our climate bring potentially profound implications for insurers, financial stability and the economy,” he said.

Carney’s evidence of climate change includes the fact that the Northern Hemisphere has been the warmest since Anglo-Saxon times in the last 30 years. He also said that atmospheric concentrations of greenhouse gases are at levels not seen in 800,000 years; and the rate of sea level rise is quicker now than at any time over the last 2 millennia.

He claimed that “evidence is mounting of man’s role in climate change”, but said that insurers are “amongst the most determined advocates for tackling it sooner rather than later.”

According to the governor, the number of registered weather-related loss events has tripled since the 1980s and inflation-adjusted insurance losses from these events have increased from an annual average of around $10 billion in the 1980s to around $50 billion over the past decade.

“The challenges currently posed by climate change pale in significance compared with what might come.  The far-sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security,” he said.

Carney said considering this, action needs to be taken now, as once climate change becomes a defining issue for financial stability, “it may already be too late”

In relation to insurers, he said improvements in risk modelling must be unrelenting as loss frequency and severity shifts with insurance extending into new markets not covered by existing models; previously unanticipated risks coming to the fore; and increasingly volatile weather trends and hydrological cycles making the future ever-harder to predict.