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August 23, 2023

New Report: As Climate Disasters Pummel the Country, Regulators Must Address the Unseen Banking Crisis Concealed Behind the Climate Crisis

WASHINGTON, D.C.— Dennis M. Kelleher, Co-founder, President, and CEO of Better Markets, issued the following statement in connection with the release of a report entitled, “The Unseen Banking Crisis Concealed Behind the Climate Crisis.”

“There’s a major untold story behind the unprecedented climate disasters pummeling the country and capturing the headlines:  today’s climate crisis is tomorrow’s banking crisis.  More frequent and costly climate disasters are wreaking havoc with the insurance industry, which is causing insurance company bankruptcies and skyrocketing premium increases, if people can get any insurance coverage at all.  The result is a proliferation of underinsured if not uninsured properties and businesses.  However, insurance companies avoiding or limiting their losses do not eliminate the losses; they merely shift those losses to others like banks which hold the mortgages and loans on much of those losses.

“There have already been 15 confirmed weather/climate disaster events each with losses exceeding $1 billion in the U.S. as of August 8th, the day the Hawaii fires started and weeks before Hurricane Hilary hit California. That’s on top of U.S. property and casualty industry losses of $26.5 billion in 2022. To limit their losses from climate events, insurance companies are going bankrupt and withdrawing from high-risk markets, including entire states like Florida and California as detailed in the Report. As a result, consumers and businesses seeking insurance in those states and areas have less choice and face higher costs for insurance if they can get coverage at all. As this occurs, communities will deteriorate as home values decline, small business close, outmigration increases, and uninsured or underinsured consumers and businesses face bankruptcy.

“While the effects of climate events are tragic for homeowners and problematic for insurance companies, they are a coming crisis for banks and the financial system. Banks are going to end up bearing much of those climate-related losses because they have large and increasingly concentrated portfolios of loans and other credit instruments to those now uninsured or underinsured real estate properties and businesses. When the inevitable climate disasters occur, those exposures will quickly become realized losses, potentially at levels that will cause banks to collapse, and possibly ignite a credit contraction, precipitate contagion, and result in a banking crisis if not a financial crash.

“The Financial Stability Oversight Council (“FSOC”) and banking regulators’ response thus far have been grossly inadequate and inconsistent with the material climate risks bearing down on banks and the financial system. For example, the FSOC member agencies were called on just two years ago to bolster the financial system’s resilience to climate-related financial risks. Yet, since then, the actions have been slow and half-hearted, with the Office of Financial Research building a computing platform containing climate-related data that is only available to member agencies and banking regulators announcing a very limited climate scenario analysis pilot for just the six large banks to gauge vulnerability to climate-related financial risks.

“This growing unseen and unacknowledged banking crisis is going to become visible soon as the climate-related disasters and losses pile up and insurance companies continue to go bankrupt and stop insuring homes, businesses, cars and other bank assets in state after state.  Just as insurance companies are acting to limit their losses, the FSOC and other banking and financial regulators must require banks and financial firms to assess their exposure to those losses and have an action plan to mitigate them before they materialize and cause banking crisis.  Climate disasters are bad enough; a banking disaster on top of that will make everything much worse.”


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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