Global insured losses from natural disasters reached at least $100 billion in the first half of 2025, representing the second-highest total on record and significantly higher than the 21st-century first-half average of $41 billion, according to preliminary analysis fromAon. As extreme weather grows more severe and unpredictable, insurance is no longer just about payouts. It’s becoming one of the most important tools for understanding and responding to climate risk, with major consequences for markets, governments, and everyday life.
How Climate Change Is Driving Up Insurance Costs
Rising temperatures and extreme weather are driving insurance costs higher. In some regions, premiums have climbed so much that coverage is now out …
Global insured losses from natural disasters reached at least $100 billion in the first half of 2025, representing the second-highest total on record and significantly higher than the 21st-century first-half average of $41 billion, according to preliminary analysis fromAon. As extreme weather grows more severe and unpredictable, insurance is no longer just about payouts. It’s becoming one of the most important tools for understanding and responding to climate risk, with major consequences for markets, governments, and everyday life.
How Climate Change Is Driving Up Insurance Costs
Rising temperatures and extreme weather are driving insurance costs higher. In some regions, premiums have climbed so much that coverage is now out of reach. In the highest-risk areas, insurers are pulling out entirely. That leaves people unprotected — and without insurance, mortgages stall, investments falter, and local economies can spiral.
Insurance as a Climate Risk Warning System
At its best, insurance cushions economies from disaster. It helps communities recover and gives governments and businesses the confidence to plan ahead. But when coverage becomes too expensive or unavailable, it’s also a warning sign that risk has grown too high. Those signals now shape investment decisions, property values, and long-term strategy.
Smarter Models, Faster Decisions
Insurance modeling has evolved dramatically. Today’s systems combine real-time climate data, satellite imagery, and predictive analytics to map risk with precision. These tools are shaping everything from global development policy to local flood defenses. In Latin America, parametric insurance now pays out automatically when certain climate triggers — like rainfall thresholds — are met, speeding relief and reducing losses.
The Role of Nature in Reducing Climate Insurance Risk
Ecosystem loss drives up climate risk, and insurers are beginning to factor that into their models. Destroying forests, reefs, or wetlands strips away natural defenses, making disasters more damaging and costly. Some insurers now back nature-based solutions, where restoring ecosystems directly reduces premiums and strengthens community protection.
Incentives for Resilience
Well-designed insurance programs can push communities toward safer, smarter choices. Stronger building codes, better flood management, and wildfire prevention measures can all lead to lower premiums. Public-private partnerships are helping make these upgrades possible, aligning financial savings with climate resilience.
From Afterthought to Essential
Insurance is no longer a background player in the climate story. It’s signaling risk, shaping policy, driving better planning, and rewarding resilience. As the climate crisis accelerates, the industry isn’t just reacting to disasters — it’s becoming one of our most important tools for surviving them.