Greater Insurability of Climate Risk: A Key to Global Economic Resilience

The 2025 Climate and Catastrophe Insight report by Aon plc highlights the critical role of insurability in enhancing global economic resilience against climate risks. In 2024, global natural disaster events caused $368 billion in economic losses, with 60 percent of the damage remaining uninsured. This significant protection gap underscores the urgent need for innovative insurance solutions and public-private partnerships to address climate risk.

The report reveals that weather-related events are becoming more frequent and costly, with global insurance losses in 2024 reaching $145 billion, 54 percent above the 21st-century average. Despite this increase, the protection gap stood at 60 percent, indicating a substantial financial headwind for communities, businesses, and governments. To close this gap, insurers must invest in technology and analytics to model and price climate risks more accurately.

Innovative insurance products and public-private partnerships can play a crucial role in enhancing global economic resilience. Index-based insurance (IBI) and parametric insurance products can provide quick and predictable payouts, while climate risk pools can help spread the risk across a larger group of stakeholders. Additionally, investments in resilience measures, such as infrastructure improvements and early warning systems, can reduce the impact of natural disasters and lower insurance premiums in the long run.

Collaboration between insurers, governments, and other stakeholders is essential to develop these innovative solutions. By working together, these parties can leverage their respective strengths to create a more climate-resilient society. Insurers can share their expertise in risk assessment and management, while governments can provide funding or incentives for private insurers to offer coverage in high-risk areas.

In conclusion, the greater insurability of climate risk is key to enhancing global economic resilience. By investing in technology and analytics, developing innovative insurance products, and fostering public-private partnerships, insurers and other stakeholders can close the protection gap and build a more climate-resilient future. The 2025 Climate and Catastrophe Insight report by Aon plc serves as a valuable roadmap for these efforts, highlighting the urgent need for action in the face of increasing climate risks.