As extreme weather becomes more frequent and more destructive, the insurance industry is grappling with whether risks such as flash flooding, wildfires, and hurricanes will remain insurable in the years ahead.
In 2024, natural disasters worldwide resulted in approximately $320 billion in total losses, of which $140 billion were insured, marking one of the highest levels in history, according to Munich Re data. And in the first half of 2025 alone, insured catastrophe losses already reached $80 billion, nearly double the ten-year average.
Yet amid the uncertainty, optimism is emerging. Growing awareness, cross-sector collaboration, and proactive prevention measures are helping organizations and communities strengthen resilience. For Dr. Angelika Werner (pictured), research director of climate risk and resilience at specialty insurer FM, the shift reflects a broader recognition that prevention and adaptation are shared responsibilities.
“Ultimately, prevention is in everyone’s hands. All of us can do something,” Werner told Insurance Business America. “There’s a general increase of understanding that we can prevent some of these losses, and working together across industries and communities brings us forward.”
Recent catastrophic events across Europe have highlighted the unpredictability of flash flooding. Werner pointed to last year’s Valencia floods as a stark reminder of the challenges that lie ahead.
“Flash flooding is very localized, which makes it extremely difficult to predict where and when events will happen,” she explained. “It’s hard to assume that a little creek could suddenly develop a flood wave of six meters or more. And it’s almost impossible for the human brain to grasp the magnitude until you see it on the ground.”
Compounding the problem, historical data is often limited and increasingly unreliable as climate change alters atmospheric patterns. “The underlying warming of the atmosphere makes such events more likely, so past data doesn’t reflect today’s risk,” Werner said. “That makes it very unpredictable to prepare for at the right level of magnitude.”
Without good precedent, risk models struggle to capture the extremes. Meanwhile, insurers globally are feeling the squeeze: non-peak perils, such as floods, wildfires, and convective storms, are contributing more to overall losses than ever.
The increasing frequency and unpredictability of extreme climate events, such as flash flooding, represent a mounting strain on insurers, reinsurers, and policyholders. But they also set the stage for a different conversation: not just about paying for losses after disasters but about reducing them before they occur.
If insurers are rethinking how they price and underwrite risk, corporate leaders are facing their own trade-offs. Even when the benefits of resilience are obvious, companies often struggle to justify the expense.
“Every budget cycle is a natural selection process,” Werner said. “Companies face cost pressures from inflation and salaries, plus the need to invest heavily in technology.
“For a CFO, it can be tough to decide between growing the business by 5% or investing in prevention to protect existing facilities. There’s no universal right or wrong – it all depends on the company – but resilience often loses out to more immediate pressures.”
Where companies do act, the benefits are significant. FM research shows strong emergency response plans can cut flood damage by up to 70%.
“Without a plan, you’re hopeless,” Werner stressed. “You may have floodgates or prevention measures, but if no one knows how to install them, you’re completely vulnerable to the elements. A good plan ensures materials are ready, protocols are maintained, and people know exactly what to do when a storm is approaching.”
Climate volatility will continue to pressure global insurance markets, but the way forward is not solely about pricing or capacity. For Werner, it’s about prevention, adaptation, and collaboration.
Linking the efforts of insurers, governments, businesses, and communities could keep coverage accessible while reducing long-term losses. Despite the scale of the climate challenge, Werner remains encouraged by the progress she sees.
“There’s much more awareness now of nature-based solutions like re-naturation of rivers and using green spaces in city planning,” she said. “We’re seeing greater communication across all levels, from insurers to communities to governments. The recognition that prevention pays off is growing.”
While climate volatility continues to pressure global insurance markets, Werner believes collaboration and awareness are key to keeping risks insurable.
“As long as we work with clients to put the right protocols and measures in place, we can prepare them to stay in business,” she said.
