Climate change strikes global economy – which countries will be hit the hardest?

Climate change is expected to have a large impact on global economic losses, with the top two expected to take heavy hits, Swiss Re’s new report has revealed.

In an analysis covering 36 countries, the Swiss Re Institute identified the Philippines and the United States as the nations currently most at risk economically from the intensification of hazards due to climate change.

Top ten countries most exposed to four weather perils

The report, titled “Changing climates: the heat is (still) on,” draws on data from the Intergovernmental Panel on Climate Change (IPCC) and Swiss Re Institute’s own research. It assesses the potential economic impacts if weather-related natural catastrophes become more intense due to climate change.

The findings reveal that the Philippines currently faces the highest economic losses relative to its GDP, at 3%, due to the four major weather perils examined. Meanwhile, the United States, with annual economic losses amounting to US$97 billion (0.38% of GDP), has the highest absolute economic losses worldwide from weather events, alongside a medium likelihood of hazard intensification.

The report also identifies countries with significant insurance protection gaps and those where loss mitigation and adaptation measures are not keeping pace with economic growth as being most financially vulnerable. This is particularly true for fast-growing Asian economies such as Thailand, China, India, and the Philippines, which are deemed most at risk.

Adapting to the changing climate

While flood risks are expected to increase globally, tropical cyclones are identified as the primary cause of major weather-related economic losses in the United States and in east and southeast Asia. In the US, the economic toll from weather events is largely driven by hurricanes, with severe thunderstorms also contributing significantly to the losses.

Jérôme Jean Haegeli, group chief economist at Swiss Re, emphasized the growing severity of weather events as a consequence of climate change, highlighting the urgent need for adaptation measures.

“The insurance industry is ready to play an important role by catalyzing investments in adaptation, directly as a long-term investor and indirectly through underwriting climate-supportive projects and sharing risk knowledge. The more accurately climate change risks are priced, the greater the chances that necessary investments will actually be made,” Haegeli said.

The Swiss Re Institute also underscored the importance of implementing adaptation measures to reduce potential losses. Such measures include enforcing building codes, enhancing flood protection, and avoiding settlement in areas prone to natural hazards.

The report goes on to suggest that the future economic impact of these disasters on each country’s GDP will largely depend on the effectiveness of future adaptation, loss reduction, and prevention strategies.

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