Economics of Warming: Damage, Insurance, and Resilience in the Face of Climate Extremes

In 2024, the global temperature for the first time exceeded the pre-industrial level by 1.5°C. At the same time, a new report by the United Nations Environment Programme (September 2026), “Limiting Overcorrection,” notes that “the world is heading toward a future warmer than required by the Paris Agreement, and if all climate commitments and policies are implemented, warming is projected to reach at least 1.8°C.” Exceeding the established limit for global temperature rise is already causing large-scale economic damage in many countries, which is especially increasing in densely populated cities and in countries unable to create a safe environment for their populations and lacking sufficient financial resources to combat extreme heat.

According to current estimates, the total annual losses to the global economy from rising planetary temperatures could amount to $450 billion. At present, the main share of the burden falls on the United States, primarily due to severe convective storms. At the same time, a significant portion of the damage—more than half of this amount—remains uninsured. For example, in developed countries, most commercial assets and housing are insured, but not against all environmental risks; in developing countries, the financial consequences of natural disasters fall mainly on businesses, the public, and the state. Under these conditions, the importance of integrated natural risk management is increasing, based on such tools as the use of new, affordable insurance protection products with clear terms and public-private schemes; the development of early warning systems and forecasting technologies; and the adaptation of cities to climate change and the strengthening of infrastructure resilience.

Author: Candidate of Economic Sciences, Associate Professor, Department of World Economy and World Finance, Financial University under the Government of the Russian Federation Anna Anatolyevna Prudnikova.