WASHINGTON – In a season of discouraging forest fires and floods, the Biden government is taking a first step to assess how climate change could hurt financial markets – and plans to start a 75-day comment period Tuesday on how the impact could reshape the insurance sector.
Insurers face disbursements from forest fires and flood risks that could spike premiums for many Americans, but they are also among the largest investors in the U.S. financial markets, with $ 4.7 trillion in net worth as of the end last year, the Ministry of Finance announced in the federal register.
A senior Treasury official said the information gathered would help better understand how climate change could potentially destabilize, thereby protecting markets, equity, bond, commodity and real estate markets. The official, who insisted on anonymity to discuss the notice, said the goal is to make all data usable for consumers, businesses, states and regulators.
The request for information comes as the United States copes with the unmistakable costs of climate change, forest fires in the western states and Hurricane Ida that power New Orleans and hundreds of thousands of people in Louisiana.
Joe Brusuelas, chief economist at the consulting firm RSM, estimates that the hurricane damage will weigh on US gross domestic product by 0.2% this quarter. This resistance should be balanced after the reconstruction. But the economic cost could persist because of the higher insurance costs. The First Street Foundation, in a report earlier this year, estimated that flood insurance premiums for the 4.3 million homes at risk of significant flooding would need to increase 7.2 times over the next 30 years to keep costs low to cover the growing risks.
President Joe Biden focused on the physical damage in virtual meetings with state governors and local leaders this summer, yet he signed on Jan.
The Federal Insurance Office of the fund follows this order and publishes a request for information with 19 key questions. These questions include what types of data are needed to best measure risk, how to standardize climate-related disclosures, and what factors to consider in the event of major market disruptions.
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