Natural Catastrophes

The 2025 loss year confirmed what the insurance industry has already been experiencing for several years. Natural catastrophes are no longer rare and exceptional, but they have become persistent, high-severity events that shape the operating environment for societies, businesses, and insurers. 

city flooding

According to the Swiss Re Institute, insured losses from natural catastrophes reached USD 107 billion in 2025. This marks the sixth consecutive year in which global natural catastrophe (Nat Cat) losses exceeded USD 100 billion. What was once considered an unusually costly year has now become the norm.

Wild fire

Wildfires and severe storms drive losses

The elevated loss level in 2025 was driven primarily by the Los Angeles wildfires. These fires alone generated an estimated USD 40 billion in insured losses, making them the most expensive wildfire event ever recorded. The scale of destruction highlighted how vulnerable densely populated and high-value areas are to climate-driven extreme events.

In addition to wildfires, severe convective storms contributed approximately USD 50 billion to the global total. As a result, 2025 became the third costliest year on record for this peril. Convective storms, including hail, tornadoes and severe thunderstorms, were once associated with relatively modest and regional losses. Today, they represent a structural and increasingly global driver of insurance severity.

More than 80% of all insured Nat Cat losses in 2025 occurred in the United States. The combination of wildfire exposure, frequent storm activity and growing concentrations of insured assets continues to amplify loss outcomes. As populations expand and property values increase in exposed areas, the financial consequences of natural hazards grow accordingly.

Shifting risk perceptions – But not reduced risk

Despite high loss levels, natural catastrophes ranked only fifth in the Allianz Risk Barometer 2026. Corporate attention has shifted toward cyber risk and artificial intelligence, which now occupy the top two positions globally.

However, this shift in ranking does not mean that natural hazards have become less relevant. Instead, it reflects changing corporate priorities in a world shaped by geopolitical uncertainty, rapid technological development and increasing cyber complexity.

Allianz emphasizes that natural catastrophe risk remains highly relevant. Quieter headline seasons, such as the 2025 Atlantic hurricane season, in which no major hurricanes made US landfall, should not be seen as a sign of diminishing underlying risk. As both reports underline, annual loss outcomes are volatile. However, the long‑term drivers of catastrophe risk—exposure growth, climate change and aging infrastructure—continue to intensify.

Europe and the Nordics

In Europe, 2025 offered a clear example of how hazard and exposure interact. Severe hailstorms occurred across several regions, yet insured losses remained relatively limited. This was not because the storms were weak, but because the most intense activity struck areas with lower concentrations of high-value assets. This illustrates a crucial principle, losses depend not only on how severe an event is, but also on where it occurs.

In the Nordic region, events such as Storm Hans in 2023 have already demonstrated how heavy rainfall and flooding can cause significant disruption. As precipitation patterns shift and extreme rainfall becomes more intense, flood-related exposures are increasingly relevant for businesses and communities in the region.

Reflecting the global shift in hazard severity, If now evaluates Nordic natural hazard exposures using the same standards applied worldwide. This approach ensures greater consistency in underwriting and places stronger emphasis on understanding location-specific vulnerabilities. According to the Swiss Re Institute, disciplined underwriting and consistent risk evaluation are essential as reinsurance market conditions evolve and capacity becomes more selective.

We seek to understand risks, and we write risks that we understand.

If’s approach to natural hazard underwriting
Sofia Hiden
Sofia Hidén, Head of Green Energy and Construction Underwriting

Head of Green Energy and Construction Unit, Sofia Hidén, notes that, in practice, this means that higher natural hazard exposure requires deeper analysis and more selective deployment of capacity. Natural catastrophes are inherently uncertain and can produce extreme losses. Helping our clients to understand and manage their exposures as well as our own underwriting volatility is therefore critical to maintaining a stable and sustainable insurance offer to the market.

As climate-driven extreme weather events become more frequent and severe, applying consistent global standards is increasingly important. A structured and disciplined approach strengthens long-term insurability and supports sustainable risk-taking.

The dual role of insurance

Both the Swiss Re Institute and Allianz reports emphasize that the insurance sector holds a dual responsibility: providing financial protection after disasters and promoting resilience before they occur. Insurance acts as a crucial safety net that enables communities and businesses to recover more quickly following catastrophic events. At the same time, insurers help strengthen resilience by supporting risk-based pricing and improving modelling capabilities.

They also encourage stronger construction standards and collaborate with public authorities to enhance preparedness and long-term risk reduction. The 2025 earthquake near Russia, which triggered tsunami alerts but resulted in limited casualties, demonstrated the value of early warning systems, effective risk communication and resilient planning. Preparedness saves lives and reduces economic disruption.

While natural catastrophe losses remained high, the 2026 Allianz survey highlighted another growing vulnerability: supply chain resilience.

Only three percent of companies consider their supply chains “very resilient”, reflecting growing pressure from interconnected risks, including geopolitical tension, cyber dependency and climate related disruptions. This means that natural catastrophes can no longer be viewed as isolated physical events. They increasingly interact with technological and geopolitical risks, creating multi crisis scenarios that challenge traditional risk management approaches.

These overlapping risks create complex, multi-crisis scenarios that challenge traditional risk management approaches. Companies must therefore look beyond single-risk assessments and adopt more holistic resilience strategies.

The 2025 results clearly demonstrate that the natural catastrophe risk landscape continues to evolve in both severity and in complexity. Even in years when certain perils generate fewer losses, the structural drivers of Nat Cat risk remain firmly upward. For If, this underscores the importance of disciplined underwriting, selective capacity deployment and consistent global evaluation frameworks.

For clients, the message is equally clear—proactive resilience, robust preparedness and well-planned investments in risk mitigation are essential. Financial protection alone is not enough. Long-term insurability depends on the combination of insurance coverage and strengthened resilience.

As extreme weather and climate-driven events become more frequent, severe and interconnected, the ability to understand, manage and adapt to natural hazard risks will define sustainable growth for both insurers and their customers.

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