Wider economic repercussions, such as a disruption of local or global supply chains and reduced productivity, can cause significant additional costs and erode the value of investments held by financial institutions. Lastly, an impact on economic activity will tend to worsen the fiscal situation of sovereigns, and can ultimately drive up sovereign default risk.
Average weather-related losses per year worldwide have roughly tripled over the past 30 years, according to data gathered by the Bank of England. At the same time, the share of uninsured losses has increased. If, as expected, extreme climate events become more frequent and costly, the future insurability of such risks will be called into question, widening the protection gap.