Key Highlights

  • Natural catastrophes are expected to cost the world $450 billion in a typical year, with as much as 62% of global losses uninsured, according to new research from risk-modelling firm Verisk.
  • Uninsured losses amount to roughly $279 billion in an average year, reflecting the mounting toll of climate change, urban expansion, and rising construction costs.
  • Last year marked the sixth consecutive year in which global insured losses breached $100 billion, driven by costly California wildfires and severe thunderstorms rather than hurricanes.
  • Major US insurers have tightened contract terms, excluded certain risks from standard policies, and exited some high-risk regions altogether, even as the industry posts strong profits overall.

A Growing and Increasingly Uninsured Price Tag

Natural catastrophes are expected to cost the world $450 billion in a typical year, according to a new forecast, with less than half of those losses covered by insurance. As much as 62% of global losses from natural disasters are uninsured, according to new research from risk-modelling firm Verisk, leaving homes, businesses, and governments facing about $279 billion in uninsured losses during an average year, and far more during especially disastrous years.

The growing price tag reflects the mounting toll of climate change and urban expansion, which has placed more property at risk, as well as the rising cost of residential construction, which in the US has outpaced broader inflation. The insurance industry itself also faces rising losses from catastrophe risk, even as it covers a shrinking share of total estimated damages.

A Sixth Straight Year of Major Insured Losses

Last year marked the sixth consecutive year in which global insured losses breached $100 billion. Although no hurricane made landfall in the continental US, insurers paid claims for record-setting, expensive California wildfires and increasingly costly severe thunderstorms. In response to rising costs from US storms, including roof repair expenses, insurers have tightened contract terms and carved many of these risks out of standard policies. Major carriers have also exited certain regions altogether by declining to renew contracts with homes deemed to be at heightened risk.

In many emerging markets hit hard by costly natural catastrophes, homes and businesses purchase little or no insurance at all, further reducing the overall share of global losses covered by insurance. An Earthquake in Myanmar in March 2025 caused about $12 billion in damage, of which insurers covered less than $100 million, reflecting low insurance uptake in that market. Texas floods in July 2025, which killed more than 130 people, were expected to cost $1.1 billion, though most of those losses were uninsured since flood coverage is typically excluded from standard US homeowners' policies.

California Wildfires Illustrate a Widening Gap

Los Angeles wildfires in January 2025, which caused as much as $65 billion in economic losses, mostly damaged properties that carried home insurance coverage. But as much as 35% of affected properties lacked insurance, according to Verisk, a result of insurer retrenchment as major carriers left the state due to rising costs, pushing many homeowners onto California's state-backed insurer of last resort.

Despite the rise in industry-wide losses, US home insurers have enjoyed a run of strong profits, buoyed by rising premiums and reduced exposure to riskier homes. The country's largest property and casualty insurer said in 2024 it would not renew policies for 72,000 property owners across California, where other major carriers have largely exited the regulated insurance market altogether.

Insurers Retreat While Premiums Rise

One major insurer said on an Earnings Call this month that it had intentionally reduced policy availability by requiring more Underwriting reviews as a way to carefully control growth and protect profitability. The carrier also declined to renew policies for high-risk coastal properties in Florida and reduced its exposure to storm and wildfire risk elsewhere, while expanding faster in markets it considers lower risk from a weather standpoint.

A senior adviser for a New York-based activist group described a recurring pattern in which insurers pull back from areas they no longer wish to insure, shifting that risk onto governments and individual homeowners, weakening local insurance markets, and then raising rates further once conditions there deteriorate.