LONDON (Realist English). A growing number of financial experts and central bankers are warning that climate change may be quietly engineering the next global financial crisis — not through a sudden market shock, but via a cascading collapse of insurability, mortgage lending, and property values.
With wildfires, floods, and hurricanes increasing in severity, insurers are withdrawing from high-risk areas across the United States, Australia, and Europe. According to the U.S. Federal Insurance Office, homeowners in disaster-prone regions now pay 82% higher premiums and face sharply rising rates of policy non-renewals.
“If you fast forward 10 or 15 years, there are going to be regions where you can’t get a mortgage, where banks won’t have branches,” Federal Reserve Chair Jay Powell told Congress in February.
Once insurance disappears, mortgage lending dries up. Without loans, property values sink. And as values fall, defaults rise, feeding a feedback loop that could mirror — or even surpass — the systemic contagion of 2008.
A December U.S. Senate report warned that climate-driven losses could create a financial shock “greater than the last financial crisis.” The Financial Stability Board and central banks including the European Central Bank are now tracking these risks in stress tests once focused mainly on traditional credit exposures.
But unlike 2008, this crisis isn’t rooted in financial mismanagement. Its cause is physical — and it’s accelerating. According to Allianz board member Günther Thallinger, entire regions are approaching a point where “insurance can no longer operate,” threatening to erase the economic value of cities, towns, and coastlines.
At the same time, political will to address these risks appears to be collapsing. Since returning to office, President Donald Trump has pulled the U.S. from global climate finance networks, gutted environmental data programs, and proposed dissolving the Federal Insurance Office.
“This type of climate risk isn’t cyclical,” said economist Ben Keys. “It’s heading in one direction. Even a slow, permanent shock can have a massive impact on house prices and financial stability.”
The fear now, analysts say, is not just about falling home values — but about financial institutions being left holding assets no longer insurable, nor sellable.
If the climate crisis continues to erode the basic assumptions of the housing market, the world’s largest asset class could become a liability, and with it, the foundations of the global financial system.
