The Australian government has sounded the alarm over the possibility that financial institutions, including insurers and banks, may discontinue their services in areas prone to severe weather events due to the escalating impacts of climate change. This retreat could lead to widespread economic repercussions.
Released on Tuesday, the government’s first-ever National Climate Risk Assessment pointed to 11 critical areas under significant threat from climate change impacts. These included the sectors of water security, agricultural stability, and economic resilience.
According to Bloomberg, the report presented a concerning scenario where the financial industry, facing an influx of climate-related disaster claims, could decide to withdraw from high-risk areas.
The potential exit is predicted to trigger a chain reaction, negatively impacting infrastructure and housing sectors. This could, in turn, lead to vulnerabilities in numerous communities, further straining other crucial systems such as healthcare, social support services, and the agriculture and food sectors.
An increase in insurance premiums in Australia, partly due to recurrent natural disasters like wildfires and floods, has already seen.
In response to the report’s findings, the government has announced plans to engage in consultations to develop an adaptation plan.
The National Adaptation Plan aims to tackle the “nationally significant, physical climate risks” identified, as stated by Jenny McAllister, Assistant Minister for Climate Change and Energy.
