In early 2025, UK insurers paid a record £226 million in weather-related home insurance claims in just three months. The storm Eowyn battered Ireland and Scotland, knocking out power to nearly a million homes. This marked the eighth consecutive quarter where property claims exceeded £100 million ($133 million USD).
The UK isn’t an exception. Across the Atlantic, Texas homeowners are facing a 43% surge in insurance premiums since 2023. By 2025, the average policy is expected to cost $500 more annually. Insurers have paid out $41 billion in catastrophe losses over five years, largely from hailstorms, hurricanes, and floods. In California, major insurers like State Farm and Allstate have stopped issuing new policies altogether, largely due to wildfire risks.
Everywhere you look, climate change is destabilizing the insurance industry, making coverage unaffordable or unavailable in high-risk areas.
The storm is here
Despite overwhelming scientific evidence, climate change is still dismissed by some as a hoax or a distant threat that won’t affect them personally. This misconception is dangerously out of step with reality. Climate-driven disasters are already disrupting lives, economies, and industries worldwide — from record-breaking floods in Germany and Pakistan, to wildfires in California and Greece, to heatwaves killing thousands across Europe.
To get a clear view of just how acute the threat of climate change is, just look at the insurance industry.
Insurance markets, once stable pillars of risk management, are now buckling under the cost of these events. Entire regions are becoming too risky to insure, and premiums are skyrocketing for millions. Far from being a future concern, climate change is a present-day crisis, reshaping the financial systems we rely on to recover from disaster.
The insurance model relies on spreading risk across many policyholders. But climate change is increasing the frequency and severity of disasters, leading to higher claims and premiums. In 2023, natural catastrophes caused $380 billion in total losses globally, with only $118 billion covered by insurance.
Reinsurers, who provide backup coverage to insurers, are raising prices and tightening terms. This trickles down to consumers as higher premiums or dropped coverage. In some cases, entire regions are becoming uninsurable. Small and mid-sized enterprises are especially vulnerable; many are now finding their business owners policy insurance premiums surging or their coverage dropped entirely after back-to-back climate disasters. In some cases, entire regions are becoming uninsurable. The “protection gap”—the growing divide between total losses and what insurance actually covers—is especially stark in developing countries, where over 90% of disaster losses are uninsured. Even in wealthier nations, insurers are pulling back from high-risk zones, leaving more people and businesses exposed.
But this isn’t jusst about property.
The whole system is under strain
Climate change isn’t just damaging property; it’s also affecting human health. Heatwaves, wildfires, and floods are leading to more injuries, illnesses, and deaths. Health and life insurers are seeing increased claims and liabilities. In Japan, insurers have introduced “heatstroke insurance” that pays out if policyholders are hospitalized due to extreme heat. On one hot day in June 2022, nearly 7,000 people purchased these policies.
Mental health claims are also rising. Survivors of climate disasters often suffer from trauma, anxiety, and depression, leading to increased demand for counseling and medications.
Farmers are also on the front lines of climate change. Droughts, floods, and extreme weather are destroying crops and livestock, leading to higher insurance claims. In the U.S., crop insurance payouts have soared from under $3 billion in 2002 to over $19 billion in 2022.
In India, millions of farmers rely on government-subsidized crop insurance. But many remain uninsured or underinsured, leaving them vulnerable to climate shocks. Between 2015 and 2021, India lost 33.9 million hectares of crops to excessive rainfall and another 35 million hectares to drought.
These losses threaten global food security. As climate change makes farming more unpredictable, insurers and governments must adapt to protect both farmers and consumers.
Ignoring climate change costs everyone. A lot
The insurance industry is at a crossroads. To remain viable, it must invest in better climate-risk modeling, advocate for stronger building codes, and adapt to the new climate reality. At the same time, it must ignore ideological, counterfactual narratives. Ideology doesn’t pay insurance premiums, unfortunately.
It remains to be seen just how insurers will adapt to this. Some are pushing for public-private partnerships to build resilient infrastructure and provide backstop coverage for uninsurable risks. Some are divesting from fossil fuels and offering premium discounts for climate-proofing homes.
But without significant reductions in greenhouse gas emissions, these measures may not be enough. As one report noted, “tackling the protection gap for those most vulnerable to climate change” is now an urgent priority for insurers worldwide.
