Munich Re: Natural disasters may cost insurers over $100 billion in 2025, despite low damage in Europe.

Munich Re estimates that natural disasters could cost insurers over $100 billion in 2025, with the first half of the year already reporting $80 billion in damages. The company's climate expert attributes the rising costs to climate change and notes that the second half of the year is typically more costly due to hurricane season in North America. He believes the $100 billion mark will be reached and may even surpass it, with seven of the past eight years exceeding this threshold.

Munich Re has recently estimated that natural disasters could cost insurers over $100 billion in 2025, with the first half of the year already reporting $80 billion in damages. The company's climate expert attributes the rising costs to climate change and notes that the second half of the year is typically more costly due to the hurricane season in North America. He believes the $100 billion mark will be reached and may even surpass it, with seven of the past eight years exceeding this threshold.

The first half of 2025 has seen a series of devastating natural catastrophes, including wildfires in California and severe convective storms in the United States. In addition, tropical cyclones have been more active than usual, with notable events in the Pacific and Indian Oceans. The report from Willis Towers Watson [1] highlights these events and their impact on the insurance industry.

The Los Angeles wildfires, which began on January 7, were particularly devastating, with over 18,000 homes and buildings destroyed and at least 29 people killed. This event underscores the increasing risk of wildfires due to prolonged drought conditions. Similarly, severe convective storms in the United States have caused significant damage, with tornadoes and flooding affecting multiple states.

The insurance industry is also preparing for potential threats in the second half of the year, including hurricanes in North America. The outlook for the hurricane season is uncertain, but experts predict a stormy season with between 7 and 9 hurricanes expected before the end of November. The risk of tropical cyclones pushing farther south, as seen with Cyclone Alfred in Australia, is also a concern.

The report also highlights the importance of adopting a broad geographic perspective in risk assessments, particularly for seismic events. The Mw 7.7 earthquake in Myanmar, which caused significant damage in Thailand, serves as a reminder of the potential for long-distance catastrophes.

As insurers brace for the potential costs of natural disasters in 2025, the industry is also focusing on improving risk models and preparing for future events. The insurance industry must account for elevated fire weather conditions, use up-to-the-moment fuel profiles, and correctly simulate the transition from wildland fire to urban conflagration.

References:
[1] https://www.wtwco.com/en-us/insights/2025/07/willis-natural-catastrophe-review-january-to-june-2025