Climate catastrophes are creating a ‘new market reality’ for insurance carriers

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🗞️ Driving the news: Climate-driven catastrophes have pushed global insurance losses to an estimated $84 billion in the first half of 2025 — the highest for this period since 2011 — according to reinsurance broker Gallagher Re
• U.S. wildfires alone accounted for nearly half the total, with January’s Southern California fires among the most destructive in Los Angeles County history
• Gallagher Re warns this marks “a new market reality” for insurers, as extreme weather events intensify

🔭 The context: Insurance losses from weather-related disasters have been rising steadily over the past decade, reflecting the growing severity and frequency of climate impacts
• In 2023, total global insured losses from natural disasters reached $100 billion for the third consecutive year
• In the U.S., insurers such as State Farm have struggled to maintain profitability in fire-prone regions, with emergency rate hikes requested to offset escalating claims
• Non-U.S. losses this year have remained unusually low, under $10 billion, highlighting the regional concentration of recent climate impacts

🌍 Why it matters for the planet: The surge in climate-related insurance claims underscores the economic risks of inaction on mitigation and adaptation
• Escalating premiums and retreating coverage in vulnerable regions threaten housing affordability and resilience, particularly in wildfire and storm-prone areas
• Without decisive climate policy and stronger risk-reduction measures, insurance markets face destabilization, leaving communities more exposed to disaster impacts

⏭️ What's next: Insurers, regulators, and policymakers are expected to re-evaluate risk models, pricing, and zoning laws to reflect the “new normal” of climate-driven hazards
• California regulators are currently reviewing State Farm’s request for a 22% emergency premium hike, which could set a precedent for other states
• Internationally, reinsurers will adjust capital reserves and may further tighten terms for high-risk regions, potentially driving more households into underinsurance or self-insurance as climate volatility persists

💬 One quote: “The combination of record U.S. wildfires and severe storms has created a market reality that the insurance industry can no longer ignore,” Gallagher Re’s report stated

📈 One stat: U.S. wildfires in January alone generated $40 billion in insured losses — nearly half of the global total for the first half of 2025

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