Moody's Warns: Natural Disasters Could Cost $41.4 Trillion by 2050
Moody's recent report, published on October 3, 2023, highlights the escalating economic risks posed by natural disasters and physical risks. The report warns of significant financial implications, with global economic losses projected to reach $41.4 trillion by 2050 in the global economy.
The report emphasizes the increasing credit risk in commercial real estate (CRE) loan portfolios. Default probabilities have risen by 18%, and expected losses have surged by over $200 million. Meanwhile, corporate operating margins are expected to decline by 2 percentage points by 2050 due to physical risk.
The US is particularly vulnerable. Without additional policy interventions, the country's GDP could shrink by 9.5% or $6 trillion by 2050. A Category 5 hurricane striking Miami could have long-term economic consequences surpassing those of a typical recession. The average annual economic cost from natural disasters is projected to rise by 26% compared to 2020 levels by 2050 in the global economy.
The Los Angeles wildfires in 2024 generated between $20-30 billion in insured damages, while global natural catastrophes that year led to $320 billion in economic losses, with $140 billion insured in the global economy.
Moody's warns that without significant transition policies, chronic pressures and acute disasters will significantly depress global GDP. The report serves as a stark reminder of the urgent need for action to mitigate the financial risks posed by natural disasters and physical risks in the global economy.
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