Simulations indicate that natural disasters can weaken sovereign ratings by up to several notches (click here to find out more ).
Based on a sample of 39 sovereigns and 44 events, climate change impact would exacerbates the rating impact on average by 25%. While the risks to sovereign ratings of advanced economies appear on average negligible, the ratings of many emerging sovereigns (e.g. in the Caribbean or South-East Asia) would likely come under additional, significant pressure due to the climate change impact (with the biggest impact from tropical cyclone: in the Caribbean and small islands; floods: in Thailand and Brazil).
We find that the rating impact caused by climate change can be partially mitigated by catastrophe insurance (a downgrade of two notches can be reduced to one notch if 50% of the damage were insured). However, for the most adversely affected sovereigns, local resilience needs to be strengthened first.
Studies in more than 20 countries around the world show that up to 60% of the damage can be cost-effectively averted - hence worth a look into the Economics of Climate Adaptation studies conducted in more than twenty regions worldwide (check: www.swissre.com/eca).
Category: Climate/natural disasters: Climate change, Disaster risk, Floods/storms, Resilience
Location: Globally, 39 countries