2025 natural catastrophe losses should not lull market into false sense of security, warns Willis

SYDNEY, January 29, 2026 – Natural catastrophes caused more than US$100 billion in insured losses in 2025, the sixth consecutive year above that threshold, yet a decrease of US$40 billion when compared with 2024. The level of losses recorded, without a single hurricane making landfall in the United States, highlights the continued severity and persistence of natural catastrophe risk.

The latest edition of the Natural Catastrophe Review 2026 published today by Willis, a WTW business (NASDAQ: WTW), with contributions from Willis Re, delves into the underlying trends, structural pressures, warning signs and systemic vulnerabilities behind climate risk.

Cameron Rye, Director of Natural Catastrophe Analytics at Willis Re said: “Good luck is no substitute for sound strategy. Even if 2025 can be described as a moderate loss year, catastrophe risk remains high, and physical risks continue to increase as the world warms. Insurers should act now to protect their portfolios against unsustainable accumulations of risk and prepare for a reversal of fortune. The path forward given these trends isn’t to walk away from risk, but instead to encourage investment in resilience and mitigation. Risk managers and sustainability teams can protect business value by working together, supported by advances in modelling, pricing and risk awareness.”

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The experience of recent seasons, both in Australia and internationally, highlights the importance of preparedness and continuing need for insurers, asset owners and businesses to reassess risk accumulations and strengthen resilience strategies.”

James Baum | Head of Pacific

“As Australia endures record-breaking heatwaves across multiple states and a rapid escalation in bushfire danger, the Review’s findings on wildfire volatility have urgent relevance. Last year has showed us globally that even a so-called ‘moderate’ loss year, the floor of climate-driven catastrophe risk remains high. Waiting for losses to materialise is not an option. The experience of recent seasons, both in Australia and internationally, highlights the importance of preparedness and continuing need for insurers, asset owners and businesses to reassess risk accumulations and strengthen resilience strategies,” added James Baum, Head of Pacific at Willis.

Key insights from the Review include:

• Wildfire must be considered a core contributor to the volatility of insurance portfolios: pricing cannot rely exclusively on historical losses. Wildfire models must be adjusted to present-day conditions, use detailed asset level characteristics to supplement exposure data and apply realistic estimates for replacement costs. Prolonged drought enhanced by global warming and the continuing encroachment of communities into the wildland-urban interface has long been predicted to make catastrophic fires much more likely, but 2025 proved how severe claims can get.
• Risk modelling has to consider compound perils: cumulative damage brought on by multiple perils in quick succession (such as earthquakes on rain saturated soil, or typhoons following seismic events) can often lead to delayed claims payments and disagreements with policy holders. Disaster risk financing products can be tailored to reduce the economic impact of a sequence of catastrophic events when they happen.
• Warming North Atlantic is changing hurricane behaviour: 2025 was the first year in a decade where no hurricanes made landfall in the US, but other places were not so fortunate. The review analyses why the Caribbean may see more Category 5 storms and for a longer season. It was previously uncommon for major hurricanes to form in October, but as the North Atlantic has warmed, the environmental conditions that are favourable to hurricane formation are lasting later in the year. That same warming also allows storms to become much stronger very quickly.
• Flood risk is no longer confined to formally defined zones, and more intense rainfall than ever before is expected to accompany tropical storms: as the world continues to warm, both ends of the hydrological spectrum (flood and drought) are expected to become more intense. The second half of 2025 featured extreme or record-setting rainfall in many locations, leading to numerous cases of severe flooding in places not typically considered to be high risk. Pluvial flooding, which occurs when intense rainfall overwhelms surface drainage and causes high water in places far removed from rivers, lakes or coasts, has become a risk to watch. Risk managers ought to think broadly about their exposure to all types of high water and adjust their insurance coverage accordingly.

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