The fallout from former World Bank Chief Economist Nicholas Stern’s report into climate change continues to stir things up around the world.

In Australia, business and political leaders have clashed over the report’s contents and what Australia should be doing.

The 700-page report has a lot to say about the potential effect on insurers – particularly those in mature markets.

“Costs of extreme weather alone could reach 0.5% to 1% of world GDP per annum by the middle of the century,” the report says. “Developed economies face a growing risk of large-scale shocks [that could affect] global financial markets through higher and more volatile costs of insurance.”

Sir Nicholas says those markets need to quickly adapt to new weather risks. “Risk-based insurance schemes, for example, provide strong signals about the size of climate risks and therefore encourage good risk management.”

IAG CEO and Insurance Council of Australia President Michael Hawker has been quick to welcome the report. He says it will help business – in all parts of the world – realistically adapt to the challenge of climate change.

However, there are issues for governments as well. One pressing need is for the development of an effective carbon trading regime or new taxes on carbon emissions, but they don’t need to come in straight away.

“If you put carbon taxes in and you say there’s going to be a carbon tax in 2015, 2020, 2025 and provided some certainty, that would create action today,” he told the ABC.