$152 Billion and Rising: New Report Shows Insurance Industry Facing Growing Average Annual Losses from Natural Catastrophes

Rhea-AI Summary

Verisk (Nasdaq: VRSK) released its 2025 Global Modeled Catastrophe Losses Report, revealing that global modeled insured average annual property losses from natural catastrophes have reached $152 billion, marking a 25% increase from 2024. The report highlights that frequency perils (severe thunderstorms, winter storms, wildfires, and inland flood) now account for $98 billion, or two-thirds of total potential losses.

Key findings include 7% annual property exposure growth from 2020-2024, with approximately 1% of year-on-year increases attributed to climate effects. The report also reveals significant regional disparities in insurance coverage, with Asia and Latin America showing lower insured loss rates (12% and 32% respectively) compared to North America (48%).

Positive

• None.

Negative

• 25% increase in modeled non-crop property & casualty losses compared to 2024
• Significant protection gaps in Asia and Latin America regions
• Escalating wildfire risks in North America with up to $65 billion in economic losses from recent fires

Insights

Catastrophe Risk Analyst

Verisk reports 25% jump in modeled catastrophe losses to $152B, signaling fundamental risk landscape shift with frequency perils now dominating insurance losses.

Verisk's 2025 Global Modeled Catastrophe Losses Report reveals a significant 25% increase in modeled insured average annual losses (AAL) from natural catastrophes, reaching $152 billion globally. This substantial jump from last year's figures represents a fundamental transformation in the catastrophe risk landscape that insurers and reinsurers must now navigate.

The most striking finding is the growing dominance of frequency perils - severe thunderstorms, winter storms, wildfires, and inland floods - which now account for 66% ($98 billion) of total modeled losses. These events, occurring more regularly than major hurricanes or earthquakes, are creating a persistent pressure on insurance capital rather than occasional extreme shocks.

Historical data confirms this isn't an anomaly but part of a concerning trend. The five-year average for insured losses has climbed to $132 billion annually, compared to $104 billion in the previous five-year period. The Palisades and Eaton fires alone caused up to $65 billion in economic losses this year, with approximately 60-70% insured.

Three key factors are driving this loss escalation: rapid property exposure growth (7% annually from 2020-2024), increasing development in high-hazard areas, and climate change effects (contributing approximately 1% of year-on-year increases). The report also highlights significant regional protection gaps, with insured losses representing just 12% of economic losses in Asia and 32% in Latin America, compared to 48% in North America.

Verisk's expansion of catastrophe models for multiple regions and perils, including the first wildfire model approved under California's new PRID framework, demonstrates the insurance industry's growing need for sophisticated risk assessment tools in this evolving landscape. For insurers, this report underscores the urgent need to reassess risk management strategies as what were once considered statistical anomalies become the new normal.

Insurance Industry Economist

Insurance industry faces structural shift as annual catastrophe losses surge 25% to $152B, driven primarily by increasingly costly frequent events.

The latest Verisk report reveals a profound economic transformation in the insurance risk landscape, with modeled insured average annual losses (AAL) from natural catastrophes increasing 25% year-over-year to $152 billion. This isn't merely a cyclical fluctuation but indicates a structural shift in catastrophe exposure patterns.

What's particularly notable is the source of this increase. The report identifies a crucial redistribution in loss drivers, with frequency perils (severe thunderstorms, winter storms, wildfires, and inland floods) now comprising 66% of total modeled AAL at $98 billion. This represents a 2:1 ratio over losses from major catastrophic events like hurricanes and earthquakes, fundamentally altering the economic calculus for insurers' capital allocation and reinsurance strategies.

The geographical distribution of risk shows significant imbalances in insurance market development. While North America has 48% of economic losses covered by insurance, Asia's insurance penetration remains at just 12%, representing both a protection gap and potential growth market for insurers with appropriate risk management capabilities.

Property exposure growth is accelerating at 7% annually (2020-2024), driven by both inflation and continued development in high-hazard areas. This combination of increasing asset values in vulnerable locations creates a compounding effect on potential losses.

For investors in insurance and reinsurance companies, this report signals potential pressure on combined ratios and underwriting profitability unless pricing models are adjusted to reflect this new risk reality. The industry's adaptation capacity will determine which firms can maintain profitability while providing necessary coverage. Verisk's expanded modeling capabilities, including newly developed models for multiple countries and perils, position the company favorably as demand increases for sophisticated catastrophe risk assessment tools in this evolving market.

Modeled non-crop property & casualty losses rose 25 percent compared to 2024, with severe thunderstorms and other frequency perils accounting for two thirds of total potential losses, according to Verisk

JERSEY CITY, N.J., Sept. 02, 2025 (GLOBE NEWSWIRE) -- Verisk (Nasdaq: VRSK), a leading global data analytics and technology provider, today revealed that the global modeled insured average annual property loss (AAL) from natural catastrophes has risen to $152 billion. This means that in any given year the insurance industry should now be prepared for total annual insured property losses from natural catastrophes that far exceed that amount, according to the latest annual report from Verisk’s Extreme Event Solutions business.

The 2025 Global Modeled Catastrophe Losses Report is an unparalleled piece of research in the industry. The annual report is informed by Verisk’s trusted suite of catastrophe models that are widely relied upon by global insurers and reinsurers across the industry for a forward-looking view of risk in the face of inflation, urban expansion, increasing event frequency and a changing climate.

The report notes a $32 billion increase in non-crop global modeled insured AAL over 2024, which reflects the upward trend in catastrophe losses experienced on a global scale. Over the past five years, insured losses have averaged $132 billion per year, compared to $104 billion in the preceding five-year period. Severe thunderstorms, winter storms, wildfires, and inland flood - also known as frequency perils, since they take place relatively ofen compared to larger events like tropical cyclones and earthquakes - now account for two thirds ($98 billion) of the total modeled AAL. 

Financial Impact of Frequency Perils Outpace Risk from Large Events by 2 to 1

Severe thunderstorms, winter storms, wildfires, and inland flood - also known as frequency perils, since they take place relatively ofen compared to larger events like tropical cyclones and earthquakes - now account for two thirds ($98 billion) of the total modeled AAL. 

“This year’s modeled losses reflect a fundamental shift in the risk landscape. Frequency perils are driving sustained, high-impact losses across geographies, and insurers must evolve their strategies to meet this challenge head-on,” said Rob Newbold, president of Verisk Extreme Event Solutions. “Natural catastrophe losses are no longer statistical anomalies—they are the new normal. Our models are designed to help the industry anticipate and absorb these shocks with confidence.”

More Key Findings – By the Numbers

• Exposure growth accelerates: Property exposure in Verisk-modeled countries grew 7 percent annually from 2020–2024, driven by inflation and construction in high-hazard areas.
• Climate change signal: Approximately 1 percent of year-on-year AAL increases are attributable to long-term climate effects.
• Protection gap persists: In Asia and Latin America, insured losses account for only 12 percent and 32 percent of economic losses, respectively, compared to 48 percent in North America.
  

Regional Insights

• North America: High insurance penetration, but wildfire risk continues to escalate. The 2025 Palisades and Eaton fires caused up to $65 billion in economic losses, with 60–70 percent insured.
• Asia & Latin America: Significant protection gaps remain, with low insurance take-up rates despite increasing exposure and urbanization.
• Europe & Oceania: Exposure growth driven by inflation and urban expansion, with annual growth rates exceeding 8 percent in some regions.
  Modeling Innovations & Regulatory Milestones

Verisk introduced new inland flood models for Malaysia, Indonesia, and Ireland, and updated models for Australia (bushfire), Mexico (earthquake), UK (flood), U.S. (severe thunderstorm) and South Korea (typhoon).

The Verisk Wildfire Model for the United States became the first catastrophe model to complete evaluation under California’s new PRID framework, supporting broader insurance availability in wildfire-prone areas.

Newbold concluded, “The report emphasizes the need for insurers and reinsurers to adopt forward-looking risk models that reflect today’s built environment and climate realities. Verisk’s catastrophe models, used with Touchstone and Touchstone Re, help companies benchmark potential losses and manage catastrophe risk with confidence.”

View the full report: Verisk Modeled Insured Catastrophe Losses: A Global Perspective for 2025

Verisk Extreme Event Solutions offers a global suite of catastrophe models that cover more than 120 countries and territories, capturing the risk from global natural catastrophes and man-made events, including terrorism and extreme casualty catastrophes. Insurance, reinsurance, financial, corporate and government clients rely on Verisk's advanced science, software and consulting services for catastrophe risk management, insurance-linked securities and agricultural risk management. These solutions enable clients to make informed decisions and help people, businesses and communities build resilience against potential disasters.

About Verisk
Verisk (Nasdaq: VRSK) is a leading strategic data analytics and technology partner to the global insurance industry. It empowers clients to strengthen operating efficiency, improve underwriting and claims outcomes, combat fraud and make informed decisions about global risks, including climate change, extreme events, sustainability and political issues. Through advanced data analytics, software, scientific research and deep industry knowledge, Verisk helps build global resilience for individuals, communities and businesses. With teams across more than 20 countries, Verisk consistently earns certification by Great Place to Work and fosters an inclusive culture where all team members feel they belong. For more, visit Verisk.com and the Verisk Newsroom.

Attachments

• Comparison of insured losses exceeding $1 billion by peril between 2015–2019 and 2020–2024
• Contribution to global insured AAL by peril for all regions

Mary Keller
Verisk
339-832-7048
mary.keller@verisk.com

FAQ

What is the global modeled insured average annual property loss (AAL) from natural catastrophes in 2025 according to Verisk (VRSK)?

According to Verisk's 2025 report, the global modeled insured average annual property loss (AAL) from natural catastrophes has risen to $152 billion, representing a 25% increase from 2024.

How much of Verisk's (VRSK) total modeled AAL is attributed to frequency perils in 2025?

Frequency perils (severe thunderstorms, winter storms, wildfires, and inland flood) account for two-thirds ($98 billion) of the total modeled AAL.

What is the insurance coverage gap between regions according to Verisk's (VRSK) 2025 report?

North America has 48% of economic losses insured, while Asia and Latin America have significantly lower rates at 12% and 32% respectively.

How much did property exposure grow annually from 2020-2024 according to Verisk (VRSK)?

Property exposure in Verisk-modeled countries grew 7% annually from 2020-2024, driven by inflation and construction in high-hazard areas.

What percentage of AAL increases are attributed to climate change in Verisk's (VRSK) 2025 report?

Approximately 1% of year-on-year AAL increases are attributable to long-term climate effects.