Climate scientists and financial experts are sounding the alarm: The U.S. economy is barreling toward a potential "death spiral" — and a changing climate is at the center of it.
A recent Inside Climate News investigation details how skyrocketing insurance costs and increasingly frequent climate disasters are destabilizing the housing market and threatening the broader financial system.
While this may sound abstract, the impacts are already reaching everyday Americans: higher premiums, unaffordable homes, and even disappearing mortgage options in high-risk areas.
What is a climate-driven financial "death spiral"?
A "death spiral" in this context refers to a compounding economic breakdown.
Rising global temperatures fuel extreme weather, which causes insurers to raise premiums or exit markets entirely. This can make housing unaffordable or uninsurable, pushing property values down and increasing mortgage delinquencies. Banks suffer losses. Credit disappears. The cycle repeats — but gets worse each time.
Why this financial crisis matters now
The climate crisis is no longer a distant environmental concern — it's a present-day economic threat. If left unchecked, it could destabilize the entire U.S. housing and financial systems.
In the first three quarters of 2024 alone, climate disasters caused $145 billion in economic losses, nearly $80 billion of which was insured, according to data from the U.S. Treasury's Federal Insurance Office cited by ICN. A separate report warns these events could spark cascading failures in small banks and ripple across the economy.
For everyday people, that means unaffordable premiums, denied mortgages, and fewer places to live — especially in disaster-prone areas. It can also increase financial vulnerability, leaving families exposed to the full cost of recovery when insurers withdraw from high-risk regions.
"We are marching towards an uninsurable future," said David Jones, the former insurance commissioner of California, in an interview with the Guardian. "The climate crisis is driving an insurance crisis."
Rachel Cleetus, senior policy director at the Union of Concerned Scientists, emphasized the stakes to ICN: "Scientists have been telling us for decades that as emissions rise, we will see these really sharp increases in extreme climate-fueled disasters."
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Definitely 🙁 How inaction makes the spiral worse — and what we can do
Doing nothing can prove far more costly than taking action. Without serious reductions in pollution and adjustments to policy and infrastructure, Americans risk long-term economic decline — not just rising premiums.
There are solutions. Individuals can move money to cleaner banks that divest from dirty fuels or invest in green 401(k)s. Supporting eco-conscious brands also helps shift the market toward sustainability.
Cities and states can enforce resilient building codes, invest in nature-based flood prevention, and adopt equitable disaster recovery plans that prioritize vulnerable communities.
Some financial institutions are starting to lead, adopting climate risk assessments and decarbonizing their portfolios — steps toward a more resilient system.
A climate-threatened economy is not inevitable
A warming climate is driving more extreme weather and environmental losses, straining the financial system. But we're not powerless. By investing in emissions cuts, resilient infrastructure, and smarter insurance policies now, we can avoid the worst-case outcomes.
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