Global insurers are associated with stakeholders, including governments and environmental groups because they adapt to the impact of climate change.
Collaboration – with partners inside and outside the traditional insurance sector – becomes a necessity for a global company that has absorbed $ 154 billion in insured losses generated by natural disasters last year.
This figure is 27% above the average at 10 years, according to a recent Gallagher Re report, which estimates that natural perils – from forest fires to Los Angeles to floods in Valencia with murderous landslides in Southeast Asia – have created direct economic costs of $ 417 billion in 2024.
Rather than hiking bonuses or completely withdrawing from high -risk markets, the industry aims to minimize future losses by working with reinsurers, brokers and other industry experts while reaching out to local governments and environmental groups, climate and technology experts, and even international agencies.
“Pulling a market is not a decision that anyone will take lightly.”
Dale PorfilioInsurance Information Institute
“No country will solve this problem alone,” explains Maryam Golnaraghi, director of climate change and the environment in Geneva, a reflection group based in Zurich for the global insurance industry. “The solution will take the whole company working at different levels and different stages to develop incentives and solutions.”
This month, the association publishes a report based on nine months of collaboration efforts between industry, university institutions, climate risk modeling companies, mortgage regulators and loan regulations and international organizations. The document, which will set up methods to protect access to home insurance in the middle of the global overvoltage of extreme weather risks, focuses on the savings developed with mature insurance markets: Australia, Canada, the EU, Japan, the United Kingdom and the United States.
The finances of world insurers / reinsurers remain strong. Global Reasurers Capital increased by $ 45 billion to reach $ 715 billion last year, while equity increased from $ 38 billion to $ 600 billion, continuing a recovery that started in 2022, according to Aon, a global professional service company.
“Higher retention and stricter coverage once again isolated the reinsurers of the worst effects of the natural disaster activity high in 2024,” said Mike Van Slootten, responsible for the analysis of the Aon reinsurance solutions market in London, in a recent Aon report.
Looking for climate risk solutions
As part of the collaboration effort to maintain financially resilient industry, certain stakeholders in the industry focus on the solutions on climate risks, explains Peter Miller, president and chief executive officer of the institutes, non -profit in Malvern, Pennsylvania, with expertise in risk management and insurance.
Global reinsurers, for example, invest massively in climate research and modeling capacities to help insurance brokers to develop specialized climate consultancy services that help customers understand and mitigate their exhibitions. Industry associations create climate -risk disclosure and management executives while insurance technology companies introduce data analysis and parametric products for climatic perils. And rating agencies continue to build climatic considerations in their evaluation methodologies.
“Industry recognizes climate change as a systemic risk that requires significant adaptation,” explains Miller. “The continuation of activities as usual would cause market disturbances and coverage gaps.
Following a natural disaster, insurers are the “first financial stakeholders”, explains Dale Porfilio, insurance manager at Insurance Information Institute (triple-I), a commercial insurance association. “We are here for this risk transfer and to make people whole.” However, the greatest frequency and severity of natural disasters – from floods to hurricane at forest fires – as well as increased repair and reconstruction costs lead to insurers in the United States to collectively reassess their risk appetite for residential goods.
“Can we continue to ensure each house in the way we have done, depending on the cost and the relative risk?” said Porfilio. As a risk -based product, premiums for guards must reflect losses that should be in the coming year. “Pulling a market is not a decision that anyone will take lightly.”
In the United States, state insurance commissioners, which can be elected, hang a more in-depth examination at the price of residential goods, he adds. Houses along the coasts and waterways and in hills and canyons often have greater exposure to natural risks in the event of a disaster than commercial properties, which tend to be located inside land and closer to central transport zones.
Organizational deep dive
Risk managers and insurance brokers directly contact these customers with new products and expertise to help them understand climate adaptation and manage their risks.
“We help organizations to become resilients on extreme weather conditions, now and for the future, by taking advantage of our sequence of climate adaptation capacities,” explains Nick Faull, responsible for climate and risk of sustainability based in London at Marsh, a global insurance broker and a risk management advisor. Marsh advises leaders to consider extreme weather events on two levels: assets and systems.
“How will the assets, including buildings, persons and operations as well as emergency intervention processes, be assigned?” Said Faull. Secondly, managers must determine how much the extreme weather events will have an impact on the broader organization: “In particular thanks to the impacts on suppliers, but also on critical infrastructure, ecosystem resources and services, customers and communities in which it works.
By in -depth monitoring their supply chains – the parent of Marsh, Marsh McLennan, offers a tool fueled by AI called Sentrisk – Companies can better prepare for extreme meteorological events. As an example, Faull quotes a British company which learned that a supplier, deep in its supply chain in Southeast Asia, was at high risk of flooding, leaving the company exposed to significant disruptions.
“With better information, the company is able to strengthen resilience in its supply chain to avoid future disturbances,” he said.
In collaboration with Floodbase, an expert in parametric floods and Swiss Re Corporation Solutions, Aon launched a parametric insurance solution in February which promises to treat and mitigate the losses of storm overvoltages linked to hurricanes along the American coast using a range of meteorological data sources. Rather than aligning payments to traditionally adjusted physical damage, such as an compensation insurance product, Aon bases them on the height of the water. The insured can select the level of payment they need for a certain level of storm overvoltage, with a rate calculated accordingly. The product can be used for any financial loss associated with the event, by attacking a set of exhibitions considerably wider than traditional insurance.
Hurricane Hélène was the most devastating natural disaster of 2024, according to the AON climate and disaster report in 2025, responsible for around $ 75 billion in economic losses, mainly due to American floods inside land and coastal. A parametric solution helps strengthen existing coverage levels and provides liquidity, explains Cole Mayer, responsible for parametric solutions at Aon. Used as an autonomous product or with traditional and non-traditional insurance policies, it offers companies more complete protection, he says, noting that for certain hurricane events, damage caused by storm waves can represent more than third party cost of loss. The industry also turns to conservation groups and governments as key collaborative partners.
In Canada, Nature Force, which includes 15 insurers and ducks Unlimited Canada, has invested in the restoration of wetlands to reduce the risk of flooding in urban communities, explains Golnaraghi. Local governments and states can focus on risk -based land zoning, apply updated building codes and promote fortified building certification. Federal and national governments, in turn, can establish resilience standards that local officials and states must respect in their post-catastrophe assistance programs and give priority to the construction of large-scale resilient infrastructure.
“Governments at all levels are crucial to extend local resilience and collaborate with the insurance sector,” explains Golnaraghi. “Together, they can develop a shared vision of the areas subject to the risks where insurance challenges increase due to an increase in unmountained risks linked to increasing exposure and vulnerability.”