Australia is among the countries most exposed to economic losses from weather-related perils, according to a new climate risk report from Swiss Re.

The study ranks 36 nations according to losses from floods, tropical cyclones, winter storms and severe thunderstorms, with Australia placing 8th. 

The reinsurer says Australia loses about 0.19% of its annual GDP to cyclones, floods and severe convective storms. While climate change currently plays a “relatively small role”, if global warming rates continue “the world could lose up to 7-10% of GDP by mid-century”.

“To date, the main drivers of rising economic losses have been growth, urbanisation and associated asset value creation: there are more assets that need to be insured,” Swiss Re said.  

“As of today, in terms of property impact, the four weather perils cause expected economic losses of $US200 billion ($306.05 billion) annually.

“However, this is just the lower bound of all potential losses, as not all perils (eg heatwaves) are covered, and only property losses are accounted for.”  

The Philippines ranks first in the report, with about 3% of its GDP lost to natural disasters, mostly tropical cyclones. The US is second at 0.38% GDP loss, followed by Thailand in third at 0.36%.

“The first step towards cutting losses is to reduce the loss potential through adaptation measures,” the reinsurer said. “Examples of adaptation actions include enforcing building codes, increasing flood protection, while keeping an eye on settlement in areas prone to natural perils.

“Ultimately, losses as a share of GDP of each country will depend on future adaptation, loss reduction and prevention.”  

The report also notes a role for insurers in financing such work, with less than 2% of funding for adaptation projects currently coming from private sources.  

“As long-term investors, insurers can contribute to the financing of mitigation efforts and adaptation infrastructure. They can also underwrite climate-positive projects, share risk knowledge and incentivise loss mitigation behaviour.”

Click here to read Swiss Re’s summary.