The total cost of U.S. weather and climate disasters over the last 5 full years exceeds $ billion, which is a record.3 During this period, massive flooding in the Midwest has caused billions of dollars in damages to farms, homes, and businesses.4 The California Department of Insurance has documented growing problems with the availability of fire insurance for homeowners, and the state legislature provided new protections for wildfire survivors.5 Last year was the sixth consecutive year that the United States experienced ten or more billion-dollar weather and climate disasters.6 And this summer, Hurricane Ida alone is estimated to have caused more than $ billion in insurance losses.7 The pandemic is a stark reminder that extreme events can materialize with little warning and trigger severe financial losses and market disruptions, and the IPCC Sixth Assessment Report is a reminder of the high uncertainty and potential costs associated with climate-related risks.
It will be important to systematically assess the resilience of large financial institutions and the broader financial system to climate-related risk scenarios. Climate Scenario Analysis As we are learning from the pandemic, risks emanating from outside the economy can have devastating financial consequences.