The climate crisis is increasingly becoming an insurance crisis as extreme weather events like floods, wildfires, and hurricanes wreak havoc on communities and industries worldwide. Insurers are facing mounting claims, and as a result, premiums are skyrocketing. A report from the Insurance Information Institute reveals that insured losses from natural disasters have surged over the past decade, with the global cost of weather-related events exceeding $100 billion annually. This has led many insurers to re-evaluate their risk models and, in some cases, withdraw coverage from high-risk areas, creating a coverage gap for homeowners, businesses, and governments.
As climate change accelerates, the challenges for the insurance industry intensify. Extreme weather events are becoming more frequent and severe, leading to significant financial losses for insurers, which in turn increases premiums for consumers. A 2024 study by Swiss Re estimates that climate change could cost the global insurance industry $183 billion annually by 2040. The shift is forcing a reevaluation of how climate risks are incorporated into business models, with insurers now factoring in the long-term impact of climate change on both natural and economic systems. Governments, too, are being urged to take more action to mitigate the risks and protect vulnerable populations. More