via AIR Worldwide

USA - New Research Exposes the Harsh Realities of Hurricanes in a Warmer World

Over the last six months, we have been conducting research at Brookings that looks closely at the ways that climate change might create financial instabilities.

We’ve found that markets are flying blind when it comes to how the physical impacts of climate change could alter the value of some stocks and undermine the fiscal integrity of communities that are most exposed to climate change. These impacts could have striking consequences — if places get so hot that they are unlivable, then the local tax base will wither.

Analysts have known about these problems, in theory, yet operated on the assumption that it was impractical to forecast climate impacts with enough precision. Climate models run globally, with coarse resolution, and downscaling the results to particular places and firms was far beyond what the models could handle. Worse, it was hard to connect the estimates of climate impacts on hand with assessments of possible damage to assets, such as roads or buildings.

A new paper out this month offers fresh evidence that it’s possible to do much better analysis of how the physical impacts of climate change could affect communities, property, and infrastructure. The analysis comes from a leading catastrophic risk modeling firm, AIR Worldwide, whose tools are widely used in insurance and other industries. Unlike yet another academic study, it will be hard for financiers to ignore this latest analysis.

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