Bank of England Governor Mark Carney said UK insurers face potentially “huge” exposure to shifts in climate-change policy and Group of 20 nations need to do more to combat associated financial stability risks.

“The challenges currently posed by climate change pale in significance compared with what might come,” Carney said in a speech at a Lloyd’s of London dinner in the UK capital late Tuesday. “Once climate change becomes a defining issue for financial stability, it may already be too late.”

The central bank has been looking into the economic and financial-stability risks posed by climate change and Carney spoke as the BOE published a report on the impact on the British insurance industry. As well as physical and liability risks, UK insurers, which manage almost 2 trillion pounds ($3 trillion) in assets, also face threats from the re-pricing of investments in fossil fuels in the move toward a lower carbon economy, Carney said.

“The exposure of UK investors, including insurance companies, to these shifts is potentially huge,” Carney said. General insurers are the most directly exposed to such losses, he said.

A key danger is that changes in policy leave oil drillers and coal miners with stranded assets, reserves that have little value because the fight against climate change will require them to be left in the ground. While disputed by energy companies, the issue has been gaining greater prominence in the past year.

Climate Goal

At most, just over a quarter of fossil-fuel reserves can be used if warming is to be limited to 2 degrees Celsius above pre-industrial levels, according to United Nations scientists. The so-called carbon budget compatible with that temperature goal would be used up in about two decades at current levels of burning fossil fuels, according to the UN data.

“A wholesale reassessment of prospects, especially if it were to occur suddenly, could potentially destabilize markets, spark a pro-cyclical crystallization of losses and a persistent tightening of financial conditions,” Carney said. “The speed at which such re-pricing occurs is uncertain and could be decisive for financial stability.”

Risks will be minimized if companies and investors begin adjusting early and policy follows a a predictable path, the governor said.

In an echo of the push to increase information disclosure following the financial crisis, Carney suggested that the G-20 could set up an industry-led group, a Climate Disclosure Task Force, to design a voluntary standard for disclosure by those companies that produce or emit carbon. The G-20, whose member states account for around 85 percent of global emissions, is in a prime position to lead the initiative on this, he said.