Allianz: How Climate Change is Unravelling Insurance Markets

Will the state always be a backstop?

Governments, once seen as insurers of last resort, are also reaching their financial limits.

Public disaster relief efforts, such as Germany’s US$33bn flood package in 2021 or Australia’s repeated payouts for wildfires and floods, are becoming harder to sustain.

Antoine Poincaré, Head of the Climate School at AXA, pointed to the experience of the Los Angeles fire as a warning sign.

“The State decides to cap insurance prices in high risk regions, private insurers leave, everybody turns to the last resort insurer, a disaster hits and the last resort insurer cannot pay out, the state raises a tax on all private insurance companies in the region to bail them out,” he explains.

“So far it ‘holds’ because it’s not so frequent, in a hotter world we don’t know for how long it will.”

This sequence reveals how unsustainable risk exposure can cascade across public and private sectors, undermining financial stability.

For the manufacturing sector, this translates to rising premiums, limited access to insurance, and growing uncertainty around future project viability—especially in climate-exposed regions.