Climate Hazards Projected to Hit Companies Hard by 2050s

Global companies face $1.2 trillion in annual climate costs by 2050s, with heat and water stress leading impacts, an S&P analysis finds.

The world’s largest companies could face annual climate-related costs of $1.2 trillion by the 2050s, according to a new S&P Global analysis.

While dramatic events like wildfires capture public attention with their visceral imagery and immediate destruction, the report reveals that extreme heat, water stress and drought will actually drive the majority of future climate-related costs for businesses.

Current State and Projections

The financial toll of climate change is escalating at an alarming rate, S&P reported. Major global companies could face annual costs from climate hazards reaching $885 billion in the 2030s, rising to $1.2 trillion by the 2050s, and further increasing to $1.6 trillion by the 2090s. These figures represent the potential financial impact on companies in the S&P Global 1200 index, which encompasses approximately 70% of global market capitalization.

These projections are based on the SSP2-4.5 climate scenario, which assumes greenhouse gas emissions will stabilize at current levels until 2050 before declining through 2100. Even with this relatively moderate scenario, global average temperatures are expected to rise by 2.7°C by century’s end, with a “very likely” range between 2.1°C and 3.5°C. Importantly, these cost estimates do not account for inflation and are presented in nominal 2024 prices.

Key Physical Hazards Driving Costs

Not all climate hazards will impact businesses equally. The analysis reveals that three specific hazards—extreme heat, water stress, and drought—will account for a staggering 91% of total costs through the 2050s. By the 2090s, these three hazards will still represent 86% of all climate-related financial impacts under the SSP2-4.5 scenario.

Extreme heat emerges as particularly significant because nearly all corporate assets will experience some exposure to temperatures exceeding local historical 95th percentile maximums. This widespread exposure tp warmer temperatures translates to higher electricity costs, reduced labor productivity, and disruptions to transportation networks across virtually all business sectors, according to S&P.

While chronic conditions like heat and drought dominate the overall financial picture, acute hazards will intensify in specific regions, the report noted. Coastal flooding, for instance, is projected to become dramatically more severe in the latter half of this century. The annual financial impact from coastal flooding for S&P Global 1200 companies is expected to increase nearly 14-fold, from $5 billion in the 2050s to $71 billion in the 2090s.

Recent Evidence of Impact

The theoretical projections of climate impact are already materializing in real-world events. Scientists confirmed that 2024 marked the warmest year on record—and the first calendar year in which global average temperatures exceeded 1.5 degrees Celsius above pre-industrial levels.

In January 2024, catastrophic wildfires devastated heavily populated areas near Los Angeles, providing a stark example of climate hazards’ destructive potential, S&P noted. Preliminary estimates from AccuWeather placed the damage and economic losses from these fires between $250 billion and $275 billion—exceeding the costs of the entire 2020 wildfire season. The human toll was equally devastating, with at least 29 deaths and more than 18,000 structures damaged or destroyed, per the report.

Most Impacted Industries

The financial burden of climate change will not be distributed equally across industries. By the 2050s, the utilities sector is projected to bear the heaviest financial toll, with annual costs reaching a staggering $244 billion, according to S&P. This stands in stark contrast to the health care sector, which faces the lowest projected impact at $31 billion annually.

On a per-company basis, the disparity becomes even more pronounced. While the average company across all industries in the S&P Global 1200 is expected to incur approximately $1 billion in annual climate-related costs by the 2050s, electric utilities face a much grimmer outlook. An average electric utility company is projected to shoulder $4.6 billion in annual costs—more than four times the cross-industry average. Similarly, multi-utilities companies that provide multiple services such as electricity and gas are expected to face around $3.9 billion in annual costs per company.

Regional Variations in Risk

Geographic location plays a crucial role in determining which climate hazards pose the greatest threats to power generation facilities, the report stated.

Power plants in South Asia and Sub-Saharan Africa face heightened vulnerability to pluvial floods—flooding caused by heavy rainfall—compared to facilities in other regions. Meanwhile, power generation facilities in Latin America and the Caribbean, as well as the Middle East and North Africa, confront significantly higher risks from drought conditions.

These regional differences highlight the need for location-specific adaptation strategies rather than one-size-fits-all approaches to climate resilience, S&P recommended.

Industry-Specific Challenges

For utilities, water stress is projected to account for 46% of the sector’s total climate-related costs by the 2050s, slightly exceeding the impact of extreme heat at 41%. This disproportionate vulnerability to water issues stems from the sector’s fundamental operational requirements. Electric utilities that operate steam-driven turbines depend heavily on reliable access to substantial volumes of fresh water. The generation process typically involves boiling water to create steam that drives turbines, making consistent water availability essential for continuous operations.

Hydroelectric power generation faces its own set of water-related vulnerabilities, the report said. Low water levels in reservoirs and dams can significantly disrupt electricity production, creating a direct link between drought conditions and reduced generation capacity. This vulnerability is particularly concerning for regions already projected to experience increased drought frequency, such as Europe, where countries like Spain are expected to spend 41% of the 2050s decade under severe drought conditions, the report added.

Current Risk Management Practices

As climate hazards intensify, companies are increasingly incorporating physical risk assessments into their strategic planning. The utilities sector has emerged as a leader in this area, with 94% of electric utility companies analyzing acute physical risks such as extreme weather events in their climate assessments. However, a significant gap exists between risk identification and financial planning—only 62% of these companies take the crucial next step of identifying potential financial impacts from these risks, according to the report.

This disconnect between risk awareness and financial quantification represents a critical vulnerability for businesses. Without translating physical hazards into financial terms, companies may underestimate the capital requirements needed for adaptation measures and resilience investments, S&P noted.

Adaptation Planning

Despite growing awareness of climate risks, only 35% of companies have disclosed specific adaptation plans that address location-specific vulnerabilities of their operations. The utilities sector demonstrates more advanced preparation, with 58% having developed such plans—significantly higher than the cross-industry average.

This disparity in adaptation planning reflects varying levels of perceived vulnerability across sectors. Utilities, with their extensive physical infrastructure and critical dependence on stable environmental conditions, have stronger incentives to develop robust adaptation strategies than companies in sectors with less direct exposure to climate hazards.

The financial case for adaptation is compelling. Research by S&P Global Sustainable and GIC found that investments in green and cool roofs—which use vegetation or heat-reflective materials to reduce building heat absorption—can save building owners $7.45 for every $1 spent when combined with strong policy support and timely deployment.

View the full report here. &

The R&I Editorial Team can be reached at [email protected].

New Jersey Workers’ Compensation Medical Cost Trends in 2024. How to Improve the Trend

Tips for managing costs and outcomes in a state where expenses can track above the national average.

By: Horizon Casualty Services, Inc. | April 1, 2025

In 2024, New Jersey’s workers’ compensation system has been influenced by several key medical trends, including rising medical costs, legislative changes, and evolving treatment protocols. Understanding these developments is crucial for stakeholders navigating the state’s workers’ compensation landscape. Below are just some of the key trends to follow:

Rising Medical Costs

HCS identifies providers with WC and PIP experience and contracts with the services most needed by the injured individual. HCS is contracted with nearly all hospitals and all level 1 and level 2 trauma centers in the State of New Jersey. We identify initial treaters, specialists, physical therapy centers, ambulatory surgical centers, urgent care providers, diagnostic centers and more. Using a proprietary formula, the best providers are highlighted so that clients can rest assured their injured claimants are in the right hands.

Rising medical costs are significantly impacting workers’ compensation systems, with New Jersey (NJ) experiencing notable challenges. Key factors contributing to this trend include:

Absence of a Medical Fee Schedule: Unlike many states, NJ lacks a standardized medical fee schedule for workers’ compensation. Instead, it relies on a “usual and customary” charge system, leading to higher medical expenses. This absence has resulted in NJ having some of the highest workers’ compensation premiums nationwide.
Medical Inflation: Nationally, medical care costs have outpaced general inflation. This trend is driven by increased consumption of medical services, labor shortages, and higher wages for healthcare workers, all of which elevate the costs of services covered by workers’ compensation.
Surgical Costs: NJ reports some of the highest surgical costs in the U.S., averaging 115% more than other states. This is attributed to the lack of fee schedules and the prevalence of out-of-network providers receiving higher payments for services.
Medical Claim Petitions: The practice of medical providers accepting payments and subsequently filing petitions for additional compensation has led to increased payouts and administrative burdens, further driving up costs.

These factors collectively contribute to the rising medical costs in NJ’s workers’ compensation system, posing challenges for employers, insurers, and policymakers in managing and mitigating these expenses.

Legislative Changes

Recent legislative changes in NJ have increased workers’ compensation costs for employers/insurers.

In August of 2024, legislation was enacted to raise the attorney fee cap in workers’ compensation cases from 20% to 25%. This adjustment acknowledges the increased workload of workers’ compensation attorneys since the cap’s establishment in 1927.

NJ’s Division of Workers’ Compensation typically requires employers/insurers to cover 60% of the injured workers’ attorney fees, with the employee responsible for the remaining 40%. With the new 25% cap, employers/insurers costs have risen.

Also, in response to escalating medical costs, NJ has implemented legislative measures aimed at regulating expenses within the workers’ compensation system.

Notably, the state increased the maximum allowable fee for evaluating physicians from $600 to $1,000. This adjustment seeks to ensure that medical experts are fairly compensated for their evaluations, potentially improving the quality of medical assessments in workers’ compensation cases.

Evolving Treatment Protocols

Dave Cucinotta, Director of Finance Strategy and Administration, Horizon Casualty Services, Inc.

The integration of advanced medical treatments and technologies has also influenced workers’ compensation medical trends in the Garden State.

“While these innovations can enhance patient outcomes, they often come with higher costs. The challenge lies in balancing the adoption of these advanced treatments with the need to manage expenses effectively,” said Dave Cucinotta, Director of Finance Strategy and Administration for Horizon Casualty Services, Inc.

The increasing prevalence of workplace-related mental injuries has prompted discussions about compensability and appropriate treatment protocols. Addressing mental health issues requires comprehensive approaches, including counseling and therapy, which can contribute to higher overall medical costs.

Comparative Analysis with Other States

When compared to other states, NJ’s workers’ compensation medical costs are higher than average. Studies by the Workers Compensation Research Institute (WCRI) indicate that medical payments per claim in NJ are notably higher, than in other states.

This comparison highlights the need for continued evaluation of cost-containment strategies to align NJ’s expenses with national benchmarks.

Impact on Stakeholders

The rising medical costs within NJ’s workers’ compensation system have significant implications for various stakeholders:

Employers: Increased medical expenses will lead to higher insurance premiums, affecting business operating costs.
Employees: While access to advanced medical treatment is beneficial, there is a concern that escalating costs could influence the approval and provision of necessary care.
Insurers: Insurance carriers may face challenges in underwriting policies and managing claims effectively considering rising medical costs.

Future Considerations

To address these challenges, stakeholders might consider the following strategies:

Promoting Preventive Care: Encouraging workplace safety and preventive health measures can reduce the incidence of injuries, thereby decreasing overall medical expenses.
Enhancing Loss Control Services: Evaluating workplaces with the intention of preventing injuries before they happen is worth the investment.
Enhancing Case Management: Improving coordination of care and case management can ensure that injured workers receive appropriate and timely treatment, potentially reducing prolonged medical costs.

How to Improve the Trend

With NJ’s workers’ compensation facing significant challenges due to rising medical costs, legislative changes, and evolving treatment protocols, there is a need for improvement.

Addressing these issues requires a collaborative approach among policymakers, employers, insurers, and healthcare providers to ensure that the system remains sustainable and continues to serve the needs of injured workers effectively.

“The most significant way to improve medical cost trends in NJ workers’ compensation is to evaluate who is pricing the claims,” said Cucinotta.

Horizon Casualty Services, Inc. (HCS) has been providing PPO network services to NJ clients since 1994

HCS plays a pivotal role in improving medical cost trends through its extensive provider network and innovative, data-driven strategies to achieve superior medical outcomes at the lowest cost. Through its Outcomes Focused Network Strategy, HCS ensures that injured workers receive care from top-tier providers who prioritize quality, adhere to evidence-based practices, and take a conservative approach to costly interventions like surgery and prescriptions. By contracting with a broad network of premier providers and securing highly competitive rates, HCS significantly reduces costs while maintaining exceptional care standards. Additionally, through proactive dispute management, precise data integrity, and an extensive network, HCS ensures a seamless, efficient process that significantly reduces administrative costs.

Cucinotta adds that, “These innovative approaches positions HCS as a leader in controlling medical costs and driving positive results in the NJ workers’ compensation landscape.”

For More Information

For more information, email Jed Hoban, HCS Business Development Executive, at [email protected] or visit or visit https://www.horizonblue.com/horizoncasualty/.

About Horizon Casualty Services, Inc.

HCS, in business since 1994, is a leading PPO in New Jersey WC and PIP. HCS has a 100% direct-contracted provider network that includes almost all New Jersey acute care hospitals. The network delivers significant overall savings and, with its deep focus on precision, an extremely low appeals rate. Its PPO results, combined with its Healthcare Value Strategy and Outcomes Focused Network, enable insurers to be the best at delivering quality medical care to claimants at the right cost — clearly a win-win for all. HCS is an independent licensee of the Blue Cross and Blue Shield Association.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Horizon Casualty Services, Inc. The editorial staff of Risk & Insurance had no role in its preparation.

Horizon Casualty Services Inc., an affiliate of Horizon Blue Cross Blue Shield of New Jersey, in business since 1994, is a leading PPO in New Jersey workers' compensation and personal injury protection. The company's 100% direct-contracted provider network includes almost all New Jersey acute care hospitals, significant overall WC savings and, with its deep focus on precision, an extremely low WC appeals rate of 0.2%. Its PPO results, combined with its WC healthcare value and OFN strategy, enables insurers to be the best at delivering quality medical care to claimants at the right cost — clearly a win-win for all.