Disasters to cost world $450bn a year from climate change and development
More than half of losses not covered by insurance as carriers carve out risk and cut exposure
Natural catastrophes are expected to cost the world $450bn in a typical year, according to a new forecast, with less than half of those losses covered by insurance.
As much as 62 per cent of global losses from natural disasters are uninsured, according to new research from risk-modelling firm Verisk, leaving homes, businesses and governments facing about $279bn in uninsured losses in an average year, and far more in the most disastrous years.
The growing price tag reflects the mounting toll of climate change and urban expansion, which has put more property at risk, as well as the rising price of residential construction, which in the US has outpaced inflation.
The insurance industry also faces rising losses from catastrophe risk, although it is covering a shrinking share of total estimated damages.
Last year was the sixth consecutive year in which global insured losses breached $100bn. Although no hurricane made landfall in the continental US, insurers paid claims for record-setting expensive California wildfires and severe thunderstorms, which have become increasingly costly.
In response to rising costs from US storms, including roof repair costs, insurers have tightened contract terms and carved many of these risks out of standard policies. Major carriers have also exited some regions altogether by opting not to renew contracts with homes deemed to be at-risk.
In many emerging markets hard hit by costly natural catastrophes, homes and businesses buy little or no insurance. As a result of these trends, the share of global losses covered by insurance is falling.
An earthquake in Myanmar in March 2025 caused about $12bn in damage, of which insurers covered less than $100mn, Verisk said, reflecting low uptake of insurance in the market.
Texas floods in July 2025, which killed more than 130 people, were expected to cost $1.1bn, but most of those losses were uninsured, since flood cover is excluded from standard homeowners’ insurance policies in the US.
Los Angeles wildfires in January 2025, which caused as much as $65bn in economic losses, mostly damaged properties with home insurance coverage.
But as much as 35 per cent of properties lacked insurance, Verisk said, due to “insurer retrenchment” — big carriers leaving the state due to rising costs — which had pushed many homeowners on to California’s state-backed insurer of last resort, the Fair Plan.
Despite the rise in industry-wide losses, US home insurers have enjoyed a run of strong profits buoyed by raising premiums and cutting their exposure to riskier homes.
State Farm, the US’s biggest property and casualty insurer, in 2024 said it would not renew policies for 72,000 property owners across California, where other carriers such as AIG have largely exited the regulated insurance market.
Progressive said on an earnings call this month that it had “intentionally reduced 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 had cut its exposure to storm and wildfire risks elsewhere, it said, while “growing faster in lower-weather-risk markets.”
Insurers “pull back from areas that they don’t want to insure anymore, dump that risk on to governments and private individuals, break local markets and then jack up their rates. That’s a pattern,” said Pete Sikora, a senior adviser for activist group New York Communities for Change.