As the world faces increasing climate challenges, the global insurance industry is at a critical point. With the planet warming, natural disasters are causing more economic damage than ever before. In the first half of 2025, disasters led to $162 billion in economic losses worldwide, with insurers covering $100 billion of that. This marks the second-highest total for insured catastrophe losses in history, highlighting both progress in insurance coverage, especially in the U.S., and ongoing issues in less wealthy regions where coverage is still lacking.
Günther Thallinger from Allianz pointed out that if global temperatures rise by 2.7 to 3 degrees Celsius, some areas, like Amsterdam, may become impossible to protect from rising sea levels. The concentration of insured losses in the U.S.—over 90% of the global total—hides the fact that many developing countries remain significantly underinsured against natural disasters. Events like flooding in Australia and wildfires in California have contributed to rising losses, yet many people in Asia, Africa, and Latin America still lack financial protection against these risks.
The global protection gap, which is the portion of disaster losses not covered by insurance, fell to 38% in 2025, the lowest ever. However, this statistic masks the reality that many populations in developing countries remain vulnerable to extreme weather without safety nets. Thallinger warned that as disaster costs rise, society could face unbearable risks that are not covered.
To address these challenges, the insurance industry is seeking to attract more private capital. Greg Case, CEO of Aon, has called for an additional $1 trillion in investment over the next decade to help the insurance sector manage economic shocks. So far, over $115 billion in alternative capital has been raised through instruments like catastrophe bonds, but more is needed as traditional insurers retreat from high-risk areas.
The situation is becoming dire, with insurers increasingly withdrawing from risky regions or significantly raising premiums, making it harder for people to find coverage. The recent Los Angeles wildfires, now considered the costliest in history, highlight this vulnerability even in developed regions.
Zurich Insurance has described the global outlook as “alarmingly bleak,” noting that insured losses have grown at more than double the rate of global GDP over the past 30 years. If this trend continues, insurance premiums will need to rise, affecting how much coverage individuals and businesses can afford.
Some experts argue that rising temperatures do not necessarily make insurance unfeasible, but the overall model of insurability may be approaching a breaking point. The World Economic Forum suggests that insurers should shift from merely transferring risk to actively managing it. This means integrating climate science into their operations and partnering with governments to build infrastructure that can withstand climate impacts.
As the role of insurers evolves, they are being called to take on a more proactive stance in building climate resilience. This shift could redefine how the industry operates, moving from being a backup plan to becoming a key player in combating climate challenges.