We can see them as the economy’s shock absorbers. And if there’s nothing to absorb the shocks, the system is in real danger. Extreme weather and its effects will of course not only affect insurance companies. The value of credits and investment of financial institutions at large in this area also vanished in the flames.
So these wildfires, and the devastation they cause to lives and property, are unequivocally drivers of financial risk. And this direct effect of the changing climate can occur via comparable channels too: strong winds and tornadoes can tear down buildings, heavy rain and hail storms could devastate greenhouses and crops and rising sea levels as well as droughts could endanger whole communities.