The ClimateWise report recommends investors take more thoroughinventories of housing and business real estate, making logs offlood risks and construction materials used. They should alsoincorporate scientists' climate projections into their owncatastrophe models. (Photo: Shutterstock)

(Bloomberg) — Insurers are increasingly worried that risingtemperatures will lead to a slump in property values that couldspark broader financial turmoil.

Those were the conclusions of a group out of theUniversity of Cambridge including some of the world's biggestinsurers.

In a report published Friday, ClimateWise said that increasingcatastrophes linked to climate change could triple losses onproperty investments over the next 30 years.

The warning adds to concerns raised by Munich Re AG last month,which said a string of floods, fires and violent storms had doubledthe normal amount of insurable losses. Munich Re has said globalclimate-related losses may have topped a record $140 billion lastyear.

“A failure to take account of these risks could be damaging bothfor individual investors and lenders, but also for the financialsystem and economy as a whole,” according to the 74-page report,which was written on the behalf of ClimateWise members includingAllianz SE, XL Group, Aviva Plc and Lloyds Bank Plc.

The warning is the latest from the financial sector of thephysical and financial risks posed by rising temperatures. Whilesome investment strategists think climate change will offeropportunities, others warn of physical damage to commercial andresidential real estate.

See chart of biggest global risks below:

Biggest global risks (Chart:Bloombert)

While scientists are cautious to link any single weather eventto global warming, they've built consensus around the probabilitythat more powerful floods, fires, droughts and storms will occurwith higher frequency as the Earth gets hotter.

“Massive wildfires appear to be occurring more frequently as aresult of climate change,” to Munich Re board member TorstenJeworrek said. He adding investors should look again at whetherthey've properly accounted for rising damages from weathercatastrophes.

The German insurer reported $160 billion of losses from naturalcatastrophes last year, some $20 billion above inflation-adjustedaverages in the previous three decades.

The ClimateWise report recommends investors take more thoroughinventories of housing and business real estate, making logs offlood risks and construction materials used. They should alsoincorporate scientists' climate projections into their owncatastrophe models.

Under one scenario tested by ClimateWise, losses on U.K.mortgage could double if temperatures increase by 2 degrees Celsius(3.6 Fahrenheit) and triple if warming spikes 4 degreesCelsius.

The United Nations wants to hold average temperature increase towell below 2 degrees Celsius, which would still represent thequickest shift in the climate since the last ice age ended some10,000 years ago.

“Financial institutions with long-term investments, includingbanks and building societies providing new 35-year mortgages today,will have exposures to risks in this time period,” the reportsaid.

The predictions come amid signs that global climatechange is causing noticeable dents in some of the world's largestand most sophisticated economies.

A protracted drought in Germany that made crucial waterwaysimpassable to ships shaved around 2 percentage points off growth inEurope's largest economy in the fourth quarter of 2018. Wildfiresin California caused the first major corporate casualty of climatechange, with utility PG&E collapsing due to a $30 billionliability from two years of fires.

Extreme weather events are the most threatening global risksthis year, the World Economic Forum said in a report publishedJanuary.

The U.S Defense Department last month warned climate changecould compromise U.S. security, with rising seas increasing floodrisk to military bases and drought-fueled wildfires endangeringthose inland.

In December, the Bank of England said it would force banks tomake better preparations for climate change after finding only afew had done so.

Warnings from the financial sector on climate change are “veryimportant” in shaping broader public understanding ofglobal-warming risks, according to Joanna Haigh, co-director of theLondon-based Grantham Institute for Climate Change and theEnvironment.

“If it concerns those who understand finance and the economy itshould worry everyone,” she said.

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