Severe convective storms (SCS) have officially become the costliest insured peril of the 21st century, according to a recent report by Aon plc. This significant shift sees SCS surpassing tropical cyclones in terms of financial impact on the insurance industry. While total economic losses for the year were below average, insured losses reached $127 billion, a figure considerably higher than the long-term average. This highlights a critical trend: even in years with fewer major events, the concentration and severity of certain perils, particularly in the United States, are dramatically reshaping the global loss landscape. The divergence between economic and insured losses underscores how frequent, high-impact events, even if not record-breaking in overall economic terms, are driving substantial payouts for insurers. This phenomenon is a clear indicator that the nature of climate-related risks is evolving, demanding new approaches to risk management and insurance.
Beneath the surface of a seemingly quieter year in terms of overall hazard, the data reveals a different story for insurers. The report cautions that even in a year with below-average hazard levels, the concentration and severity of specific events can profoundly alter the global loss picture. This is largely driven by high-severity, frequent-peril events, with a notable concentration in the United States. The implications for the insurance sector are profound, suggesting a need to adapt strategies to account for these evolving risk patterns. The consistent rise in weather exposures, with 2025 marking the sixth consecutive year of insurance payouts exceeding $100 billion, reinforces this urgent need for adaptation.
Featured snippet paragraph: What is a severe convective storm? Severe convective storms are intense weather phenomena characterized by strong updrafts, heavy rain, lightning, thunder, and often hail and strong winds. They are a leading cause of insured losses globally, particularly in the United States, due to their frequency and severity.
While insured losses saw a slight decline from the previous year, the overarching long-term trend indicates a consistent increase in weather-related exposures. This trend is further evidenced by the fact that for six consecutive years, insurance payouts have surpassed the $100 billion mark. The report notes that the third quarter of the year saw subdued catastrophe activity, with the fourth quarter experiencing losses approximately 25% below average. Crucial factors contributing to this were the absence of significant hurricane landfalls in the U.S. and a general lull in Atlantic storm activity during the peak season.
The global insurance protection gap, which represents the difference between economic losses from natural disasters and the amount covered by insurance, has narrowed to a record low of 51%. This improvement is largely attributed to the concentration of losses within the U.S., which accounted for a significant 81% of global insured losses. This concentration is a direct reflection of the U.S. market’s high insurance penetration rates.
Severe convective storms were a dominant factor in insured losses during 2025, accounting for $61 billion globally. This figure represents the third-highest SCS total ever recorded, underscoring their increasing impact. A striking statistic from the report is that thirty insured loss events each exceeded $1 billion in 2025, a figure substantially higher than the historical average of 17. This accumulation of increasingly frequent, medium-sized catastrophes is a significant concern for the industry.
Beyond SCS, wildfires in California, specifically the Palisades and Eaton Fires, were the year’s costliest events in economic terms, causing $58 billion in economic losses and $41 billion in insured losses. These events set a new global record as the most expensive wildfires ever documented. The human toll from natural disasters was also significant, with global fatalities totaling 42,000, primarily driven by earthquakes and heatwaves. This figure is 45% below the 21st-century average, with the Myanmar earthquake being the deadliest event outside of heatwaves, claiming 5,456 lives.
Extreme heat emerged as a major driver of natural disaster-related deaths, with over 25,000 fatalities globally. The year 2025 ranked as the third-hottest year on record, a concerning trend that correlates with increased mortality from heat-related causes. The convergence of these severe weather events, from SCS to wildfires and extreme heat, paints a picture of a world increasingly vulnerable to climate impacts.
Events resulting in economic losses exceeding $10 billion were diverse, including the California fires, a mid-March SCS outbreak in the U.S., seasonal flooding in China, the Myanmar earthquake, and Hurricane Melissa in the Caribbean. Notably, for the first time since 2020, no such high-impact events were recorded in the EMEA region, indicating a localized pattern of severe events.
Looking at regional trends, the United States bore the brunt of global economic losses, with over 54% occurring within its borders. Above-average losses were primarily driven by wildfires and SCS, leading to insured losses of $103 billion, representing a substantial 81% of the global industry’s losses. In the Americas, Hurricane Melissa was the region’s most costly event, causing $11 billion in economic damages and $2.5 billion in insured losses across Jamaica, Cuba, and other areas. South America faced significant drought impacts, particularly Brazil, with approximately $5 billion in agricultural losses.
In the EMEA region, natural disasters resulted in economic losses of at least $21 billion, significantly below the 21st-century average of $54 billion, marking the lowest loss since 2006. Insurers covered around $12 billion, which was under the long-term mean of $15 billion. These figures were considerably lower than in 2024, when major flood events had escalated costs across the region. The APAC region saw the Myanmar earthquake as its deadliest global event, with $15.7 billion in economic losses. Flooding in China and cyclones in South and Southeast Asia also contributed to significant losses, with Australia experiencing two billion-dollar insured loss events.
Alternative risk transfer solutions are playing an increasingly vital role in providing the necessary capital to help organizations mitigate risks and enhance their resilience. For instance, following Hurricane Melissa, the Jamaican government secured over $650 million in liquidity within two months, including funds from the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and a World Bank-supported catastrophe bond, both utilizing parametric triggers. Parametric insurance products, which disburse funds automatically upon meeting predefined triggers, proved crucial in providing rapid payouts during events like Hurricane Melissa.
The report strongly advocates for increased resilience through smarter technology and robust infrastructure. This includes better forecasting systems, resilient building standards, and modernized infrastructure to minimize long-term damage and facilitate faster recovery for communities and businesses. A data-driven approach is paramount, enabling businesses to better understand exposures, price future risks accurately, and measure the impact of their mitigation efforts. This not only advances resilience but also ensures businesses remain competitive and relevant in an evolving risk landscape.
Resilience must now be viewed as both physical and financial. Organizations are urged to integrate adaptation strategies into their workforce and location planning, invest in predictive analytics, and foster cross-functional collaboration to manage weather risks effectively. As climate events continue to impact people and property, the opportunity lies in leveraging data to strengthen preparedness, redefine risk management strategies, and build partnerships that support quicker recovery and enduring resilience. The shift in insured perils underscores the need for proactive and innovative approaches to navigate the complex challenges of a changing climate.
