This post summarizes a recent industry report showing that 2025 ranked as the third-costliest year on record for billion-dollar weather and climate disasters in the United States, with total losses surpassing $100 billion.
I distill the main findings for risk managers and insurers, explain the implications for underwriting and capital planning, and highlight emerging non-physical threats—such as cyber ransoms and AI—that are reshaping priorities for the insurance sector in 2026.
2025 in context: rising frequency and severity of climate losses
Last year’s bill — more than $100 billion in combined insured and economic losses — places 2025 only behind two prior years in the modern record for billion-dollar events.
This trend reflects not only an increase in the number of extreme events but also higher vulnerability where exposure and development intersect with hazardous weather.
These are not isolated spikes but part of a pattern of escalating physical risk.
That pattern forces a reconsideration of how capital is allocated, how premiums are priced, and where resilience investments should go.
What this means for insurers and risk managers
Underwriting exposure is increasing as more perils breach the billion-dollar threshold.
Insurers face pressure on loss ratios and capital reserves when multiple large losses cluster within a policy year.
That exposure is not uniform across regions; coastal, wildfire-prone, and flood-exposed areas remain focal points for stress testing and reinsurance strategies.
There are practical implications for insurers’ balance sheets and for policyholders: higher premiums where risk is concentrated, stricter underwriting terms, and an accelerated push for risk-mitigation products and loss-prevention services.
Emerging non-physical risks are compounding the challenge
The report also situates climate losses alongside a set of evolving non-physical threats that worry insurers as much as catastrophes of wind, flood or fire.
Insurers are now juggling both traditional hazard accumulation and novel exposures that can generate rapid, large losses.
Three risks repeatedly flagged by industry coverage are particularly notable for their potential to disrupt underwriting and operational continuity.
- Cyber ransoms — Ransomware events can produce large, concentrated losses and cascade across supply chains, making aggregation modeling and policy wordings more complex.
- Artificial intelligence — AI introduces both new underwriting opportunities and new liability exposures, from algorithmic failures to automated decision-making that may lead to systemic claims.
- Mandatory personal insurance — Regulatory shifts toward compulsory coverages in some jurisdictions could alter market dynamics, change exposure profiles, and redistribute risk across public and private sectors.
Product innovation and market responses
Insurers are responding by developing tailored solutions to close coverage gaps — for example, policies designed for data centre construction that account for both physical damage and operational interruption.
Such product development reflects a pragmatic approach: combine refined risk selection with bespoke terms to serve specialized exposures.
Carriers are strengthening catastrophe modeling, investing in loss prevention partnerships, and reassessing reinsurance and capital strategies to withstand higher-frequency, higher-severity loss scenarios.
Practical takeaways for stakeholders
For carriers: prioritize capital adequacy and refine aggregation models. Expand scenario stress testing for both physical and non-physical risks.
Consider expanding product suites to include resilience incentives. Tailor coverages for emerging exposures.
For policyholders and risk managers: invest in mitigation and gather granular exposure data. Engage with insurers early to negotiate terms that reflect actual risk-reduction measures.
Data-centre builders, infrastructure owners, and firms with complex supply chains should expect tighter scrutiny. More customized solutions may also be available.
If you need the full original report, note that access may require a paid subscription. Contact the publisher for subscription options or check whether your organization already has corporate access.
Here is the source article for this story: Last year was third costliest ever in terms of US extreme weather events