Last year was the first year that exceeded 1.5°C (2.7°F) warming above pre-industrial levels resulting in an estimated 60 percent insurance protection gap for natural catastrophes, according to WTW’s Natural Catastrophe Review (July – December 2024).
One reason for the heightened temperatures was El Niño, which spanned 2023 and 2024.
Further analysis revealed that heat waves are now lasting twice as long and with extreme heat events quadrupling in the past 40 years.
The mounting financial impact continues to be driven by the expansion in both the number and value of assets at risk, the biannual publication noted, adding to the strain on global insurance markets.
Global insured losses surpassed $140 billion in 2024, marking the fifth consecutive year insured damages exceeded $100 billion.
Total economic damages surpassed $350 billion, highlighting the inadequacy in resilience to climate-related risks, the global advisory firm said.
Wildfires in Los Angeles have already added to the pressure with insurance losses estimated to be $30-$40 billion in the first few weeks of 2025.
Major natural disaster events in 2024 included Spain’s costliest natural catastrophe (the Valencia floods causing €3.7 billion in claims), the highest insurance claims on record for natural catastrophes in Canada ($5.6 billion), hurricanes Helene and Milton in the U.S. (combined $45 billion) and the deadliest Western Pacific typhoon season since 2013.
While flooding was seen in many regions of the world, drought impacted South America, disrupting key sectors including agriculture, energy and transportation.
Climate change is also playing an increasingly prominent role, the report noted, with several events in 2024 being linked to human-caused warming, including hurricanes Helene and Milton, the South American drought, and Storm Boris, which impacted Europe.
What can’t be ignored is the how climate disasters impact industries, like electricity, transportation and water services.
Addressing the issue, the report suggested the industry consider enhanced risk modeling and innovative insurance solutions, while remaining adaptable and proactive when it comes to mitigating the growing impact of climate change on economies and societies.
The report stressed “Integrated, cross-sectoral approaches to resilience and risk management.”
“Our long-standing collaboration with scientists gives us better insights into growing exposure to perils, especially perils that are changing rapidly,” said Hélène Galy, head of WTW Research Network. “It’s easy to be lured by the increased sophistication of risk models: a deeper understanding of data and science are critical to identify real improvements and remaining limitations of risk models, to make them more useful to decision-makers.”
Peter Carter, head of Climate Practice for WTW warned not to focus on just one approach.
“Credible data and risk models can help you make informed choices about trade-offs: making investments to become more resilient, buying more insurance protection or accepting the risk,” he said. “Simply having lots of data or a single modelling approach may not give the robust risk perspectives you need. Seeking expert input and a more nuanced modelling approach, where you challenge your core modelling approach (‘defender’) with a different approach (‘challenger’) will provide alternative perspectives. Then you will navigate an increasingly volatile natural hazard environment much more effectively.”