Rising losses from floods, fires and storms reveal urgent call for public-private action in climate risk management.
Over the last decade, extreme weather events from tornados and hurricanes to floods and wildfires have inflicted a staggering toll on both people and economies worldwide. Between 2014 and 2023, these events caused around USD 2 trillion in economic losses globally, and the outlook is only becoming more concerning.
Driven by shifting climate patterns, storms are growing more frequent and severe, with rising sea levels, erratic precipitation, and warming temperatures disrupting ecosystems, food production, and public health. The compounding impact of these changes threatens to cause long-term environmental and financial damage.
Insurance supports recovery but coverage gaps remain
The global insurance industry plays a vital role in helping communities recover from natural disasters. In 2023 alone, insurers paid out USD 108 billion for damages caused by extreme weather. Beyond financial support, insurers also provide advanced modeling and risk management advice to help businesses and governments prepare for future events.
However, despite this support, only 38% of global losses from natural catastrophes were insured in 2023. That left USD 174 billion of losses uninsured a clear signal of widespread vulnerability.
This gap in coverage is due to several factors. Many individuals and businesses underestimate the risks or cannot afford appropriate protection. At the same time, the cost of insurance is rising, with climate-related insured losses growing faster than global GDP for the past 30 years. If this trend continues, premiums will likely increase further, making it even harder for people to afford the protection they need.
Three critical actions to build climate resilience
To protect economies and communities from escalating climate threats, experts are urging policymakers to adopt a three-part response:
- Invest in Risk Prevention and Climate Data
Stronger national planning is needed to identify high-risk zones and implement strategies that can prevent or reduce damage. Governments should support climate modeling, data analytics, and scientific research, while establishing national centers of expertise to guide smarter investments. Collaborating with the insurance industry can provide valuable insights for building long-term resilience.
- Improve Insurance access and affordability
As risks grow, insurance costs are likely to rise. To ensure continued coverage, governments can promote awareness and offer incentives for purchasing insurance, while maintaining flexible regulatory frameworks. Crucially, pricing should be based on actual risk, not subsidies, so markets can guide development away from hazard-prone areas and toward more sustainable practices.
- Promote public-private risk-sharing solutions
Given limited public funds innovative financial tools are needed. This includes blended finance models that bring private capital into resilience projects and public-private partnerships (PPPs) to improve insurance coverage. By forming (re)insurance pools, risks can be more evenly distributed, particularly in high-risk regions, while still relying on private markets to accurately price those risks.
Racing against a changing climate
The rising cost of natural disasters is a stark warning that climate change is no longer a distant threat it’s a present and growing reality. To meet this challenge, governments, insurers, and communities must work together to reduce risks, expand access to financial protection, and build resilience into every layer of society.
Investing in these measures today will help ensure a more secure, stable tomorrow where people and economies are better prepared to weather the storms ahead.