ZURICH, SWITZERLAND – The first half of 2025 produced $80 billion in insured catastrophe losses, making it the second-costliest start to a year since global records began in 1970, according to Swiss Re's October 2025 sigma report. Only the first half of 2011—dominated by the Japan earthquake and tsunami—exceeded this year's losses.
The $80 billion figure represents insured losses alone. Total economic losses exceeded $190 billion when uninsured property damage is included. The gap between economic and insured losses—$110 billion—represents the largest "protection gap" in recorded history, highlighting how many property owners and businesses lack adequate insurance coverage.
What's driving these catastrophic losses? The data points to an unmistakable pattern: climate change is fundamentally altering the frequency, severity, and geographic distribution of natural disasters. Events that were once "100-year floods" now occur every 5-10 years. Wildfires that once burned 100,000 acres now consume millions. Severe convective storms that once caused $1 billion in damage now routinely exceed $5 billion.
For businesses and property owners, these losses translate directly into insurance premium increases of 15-40% across property lines—and in some high-risk areas, coverage is becoming unavailable at any price.
Breaking Down the $80 Billion: What Caused 2025's Catastrophic Losses
Swiss Re's analysis reveals several major catastrophe events driving 2025's record losses:
Severe Convective Storms: $42 Billion (52% of Total Losses)
"Severe convective storms" is insurance industry terminology for thunderstorms that produce tornadoes, large hail, damaging straight-line winds, or flash flooding. These storms accounted for more than half of all catastrophe losses in the first half of 2025.
Major SCS events in 2025:
April Tornado Outbreak (April 10-14): A multi-day severe weather event spawned 127 tornadoes across the Central and Southern United States, causing $11.2 billion in insured losses. This outbreak destroyed 2,400 homes and damaged 18,000+ structures. The deadliest tornado—an EF-4 that struck a suburb of Memphis—killed 38 people and caused $2.8 billion in damage alone.
Texas Derecho Series (May-June): Three separate derecho events struck Texas in May and June, including the May 16 Houston derecho that caused $6.5 billion in insured losses. Combined, the Texas derechos produced $14.8 billion in insured losses—making this the costliest derecho season in U.S. history.
Midwest Hail Season (May-July): An exceptionally active hail season produced 47 separate billion-dollar hail events across the Midwest and Great Plains. Baseball-sized hail in Denver on June 3 alone caused $3.2 billion in vehicle and property damage. Total hail losses: $15.6 billion.
Why SCS losses keep breaking records:
Climate research published in Nature Climate Change (September 2025) found that atmospheric conditions favorable for severe thunderstorm development have increased 25% since 1980. Warmer air holds more moisture, creating higher-energy storm systems. The jet stream's increasing waviness (due to Arctic warming) creates more frequent collision zones between warm, moist air and cool, dry air—the perfect recipe for severe weather.
Winter Storms and Freezes: $18 Billion (22% of Total Losses)
January 2025 Arctic Outbreak: A polar vortex collapse sent Arctic air deep into the United States, producing the coldest temperatures since 1989 across 32 states. The two-week cold snap caused $12.4 billion in insured losses:
- Frozen and burst pipes: $7.8 billion in property damage
- Vehicle damage from extreme cold: $1.9 billion
- Agricultural losses: $1.4 billion (crop freezes, livestock losses)
- Business interruption: $1.3 billion
Texas bore the brunt of the cold, with $4.2 billion in insured losses. Unlike the February 2021 freeze (which caused $15 billion in insured losses), most Texas businesses had learned from the previous event and implemented freeze protection measures—limiting damage significantly.
February Ice Storm: A week-long ice storm paralyzed the Southeast, coating everything in up to 3 inches of ice. The weight collapsed thousands of roofs, downed power lines, and left 4 million customers without power for up to 12 days. Insured losses: $5.6 billion.
Wildfires: $11 Billion (14% of Total Losses)
California Fire Season: An unusually early and intense fire season in California produced $8.2 billion in insured losses from January through June 2025:
- Malibu Canyon Fire (January): Destroyed 847 homes and burned 44,000 acres during record winter heat. Insured losses: $3.1 billion.
- Sacramento Complex (April-May): A series of wind-driven grassland fires burned through suburban areas north of Sacramento, destroying 1,200 homes. Insured losses: $2.4 billion.
- Lake Tahoe Wildfire (June): High winds pushed a forest fire into South Lake Tahoe, forcing evacuation of 22,000 residents and destroying 380 homes. Insured losses: $1.8 billion.
Texas Panhandle Smokehouse Creek Fire: The largest wildfire in Texas history burned 1.2 million acres, destroyed 500+ structures, and killed thousands of cattle. While primarily impacting agricultural land, insured losses still reached $900 million.
Canadian Wildfires Impact: Smoke from Canadian wildfires blanketed the Eastern U.S. for weeks in May and June, causing significant air quality-related health impacts and business interruption losses. While difficult to quantify precisely, insurers estimate these indirect wildfire impacts added $1.9 billion in health and BI claims.
Flooding: $6 Billion (8% of Total Losses)
Midwest River Flooding (March-April): Rapid snowmelt combined with heavy spring rains caused major flooding along the Mississippi, Missouri, and Ohio rivers. While the National Flood Insurance Program (NFIP) covered most residential losses, commercial property flood damage still produced $3.8 billion in insured losses.
Southeastern Flash Floods: A series of intense rainfall events—including an April event that dropped 18 inches of rain in 24 hours on parts of Georgia—caused $2.2 billion in flash flood losses.
Other Perils: $3 Billion (4% of Total Losses)
- Earthquakes (primarily California): $1.2 billion
- Severe winter weather (excluding major events listed above): $1.1 billion
- Other weather events: $700 million
The Protection Gap Crisis: $110 Billion in Uninsured Losses
The most troubling aspect of 2025's catastrophe season isn't the $80 billion in insured losses—it's the $110 billion in uninsured economic damage.
What Is the Protection Gap?
The "protection gap" is the difference between total economic losses and insured losses. It represents damage that someone absorbed financially—homeowners who couldn't afford to rebuild, businesses that closed permanently, municipalities that couldn't repair infrastructure, agricultural operations that went bankrupt.
2025's $110 billion protection gap breaks down as:
Flood losses: $47 billion uninsured (68% of total flood losses were uninsured)
- Reason: Most property insurance excludes flood; NFIP coverage limits are often inadequate; many at-risk properties have no flood insurance
Agricultural losses: $28 billion uninsured (71% of ag losses were uninsured)
- Reason: Crop insurance covers only specific crop losses; livestock losses often uninsured; land value losses excluded
Infrastructure damage: $19 billion uninsured (municipal infrastructure is rarely insured)
- Reason: Local governments self-insure or can't afford coverage; federal disaster aid partially covers but doesn't fully reimburse
Underinsured property: $16 billion (property was insured but limits were inadequate)
- Reason: Inflation has outpaced policy limit increases; deductibles have risen sharply; some perils excluded
Total uninsured losses represent 58% of all economic damage from catastrophes. This percentage has been climbing steadily—in 2015, only 42% of catastrophe losses were uninsured.
Why the Protection Gap Is Growing
1. Insurance is becoming unaffordable
Property insurance premiums in catastrophe-prone areas have increased faster than household income:
- Florida homeowners: +67% average premium increase 2020-2025
- California wildfire areas: +89% average increase 2020-2025
- Gulf Coast hurricane zones: +72% average increase 2020-2025
Many property owners are dropping coverage or reducing limits to afford premiums.
2. Insurers are withdrawing from high-risk markets
Major insurers have stopped writing new policies or are non-renewing existing policies in:
- California wildfire zones (State Farm, Allstate, and 9 other major carriers stopped writing new policies)
- Florida coastal areas (7 major carriers exited the market entirely)
- Louisiana hurricane zones (4 carriers became insolvent; others exited)
This forces property owners into state-run programs (Citizens in Florida, FAIR plans in California) with limited coverage or higher costs.
3. Deductibles have skyrocketed
To manage exposure, insurers have dramatically increased deductibles:
- Hurricane deductibles: Now typically 5-10% of dwelling value (vs. 1-2% in 2015)
- Hail deductibles: Often $5,000-$10,000 flat amount or 1-2% of value
- Earthquake deductibles: Typically 10-20% of dwelling value
Real-world impact: A $500,000 home with a 5% hurricane deductible means the owner pays the first $25,000 of damage. Many owners can't afford this and are effectively self-insuring for all but total-loss events.
4. Climate change is making previously "safe" areas risky
Areas that historically had minimal catastrophe exposure are now high-risk:
- Inland flooding from intense rainfall events (not coastal storm surge)
- Wildfires spreading to suburban areas previously considered safe
- Severe convective storms intensifying in areas with no historical tornado activity
- Freeze damage occurring in southern states that rarely experience hard freezes
Property owners in these "emerging risk" areas often lack adequate coverage because they didn't historically need it.
How Record Catastrophe Losses Are Changing Property Insurance
The insurance industry is fundamentally reshaping property coverage in response to escalating catastrophe losses. Here's what businesses and property owners are experiencing:
1. Premium Increases Accelerating
Property insurance premiums are rising at the fastest pace since the 1970s:
Commercial property insurance:
- Catastrophe-exposed properties: +25-40% average increases at 2025 renewals
- Non-catastrophe properties: +12-18% increases (driven by reinsurance cost increases)
- High-hazard properties (coastal, wildfire zones): +50-125% increases or non-renewal
Homeowners insurance:
- National average: +21% increase 2024-2025
- High-risk states (FL, CA, LA, TX): +35-67% increases
- Wildfire interface areas: +60-110% increases
Why premiums are rising:
- Reinsurance costs up 30-45% (reinsurers are raising rates to cover their own catastrophe losses)
- Loss costs increasing faster than inflation (rebuild costs up 18% while general inflation is 3.2%)
- Climate models showing higher future loss expectations
- Insurers rebuilding depleted surplus after record losses
2. Coverage Restrictions Expanding
Insurers are limiting exposure through restrictive policy terms:
New exclusions and sublimits:
- Wildfire smoke damage sublimits (typically $10,000-$25,000 instead of full policy limits)
- Wind-driven rain exclusions (unless wind first damages the roof or walls)
- Flood exclusions expanded to include "surface water" (excluding more rainfall flooding)
- Mold damage sublimits reduced to $5,000-$10,000
Valuation changes:
- Actual cash value (ACV) roofs: Insurers paying depreciated value for roofs over 10-15 years old, not replacement cost
- Scheduled property limits: Fine art, jewelry, and expensive equipment now require separate scheduling with appraisals
- Coinsurance penalties: More policies requiring 100% insurance-to-value; underinsured properties face claim penalties
Mandatory risk mitigation requirements:
- Wildfire properties: Required defensible space, ember-resistant vents, Class A roofing
- Hurricane zones: Required impact-resistant roofing, shutters or impact glass
- Hail-prone areas: Required Class 4 impact-resistant roofing shingles
Failure to meet these requirements can result in coverage denial or severe sublimits.
3. The Rise of Parametric Insurance
Traditional property insurance pays actual losses after inspection and adjustment. Parametric insurance pays predetermined amounts when specific measurable events occur—no adjuster, no inspection, no claim dispute.
How parametric insurance works:
Trigger events are predefined:
- Hurricane with wind speeds exceeding X mph at your location
- Earthquake with magnitude exceeding X within Y miles of your property
- Rainfall exceeding X inches in 24 hours
- Wildfire within X miles of your property
Payouts are automatic:
- When the trigger occurs, payment is made within 7-30 days
- Amount is predetermined (e.g., $100,000 if Category 4 hurricane winds hit your ZIP code)
- No adjuster visit, no claim documentation required
- No dispute about causation or damage extent
Why parametric insurance is growing:
- Fast payment (critical for business continuity)
- No adjuster delays or lowball settlements
- Covers business interruption without proving income loss
- Can fill gaps in traditional coverage
The downside:
- You might collect a payout even if you have no damage (if the trigger occurs)
- You might have significant damage but no payout (if the trigger doesn't occur)
- Typically more expensive per dollar of coverage than traditional insurance
Market growth: Parametric catastrophe insurance grew 240% in 2025, with businesses increasingly using it to supplement traditional coverage.
4. Named Storm Deductibles Becoming Standard Outside Hurricane Zones
Previously, named storm deductibles (typically 2-5% of property value instead of flat $1,000-$5,000) only applied in coastal hurricane zones. Now they're spreading inland:
States adding named storm deductibles in 2025:
- Oklahoma (for derechos and severe convective storms classified as "named wind events")
- Texas (expanded from coastal counties to entire state)
- Kansas, Nebraska, Iowa (for severe thunderstorm complexes)
- Tennessee, Arkansas, Missouri (for severe weather systems)
Impact: A business with $5 million in property coverage and a 3% named storm deductible pays the first $150,000 of damage—instead of a $5,000 standard deductible.
Many businesses don't realize this until they file a claim and discover they're essentially self-insured for the first $150,000.
Five Strategies to Protect Your Business in a High-Catastrophe Environment
Record catastrophe losses and rising premiums require businesses to rethink their property risk management. Here are the most effective strategies:
Strategy 1: Conduct a Catastrophe Exposure Analysis
Many businesses don't understand their actual catastrophe exposure. A comprehensive analysis should evaluate:
Hazard identification:
- Flood zones (FEMA maps plus private flood models that account for climate change)
- Wildfire risk (WUI zones, fuel loads, fire history, topography)
- Wind exposure (hurricane, tornado, derecho, severe thunderstorm patterns)
- Seismic risk (earthquake zones, fault proximity, soil liquefaction potential)
- Winter storm risk (freeze potential, ice storm patterns, snow loads)
Vulnerability assessment:
- Building construction type and age
- Roof condition and impact resistance
- Window and door wind resistance
- Fire-resistant materials and defensible space
- Flood elevation and flood-proofing measures
Financial impact modeling:
- Maximum probable loss at different return periods (100-year, 250-year, 500-year events)
- Business interruption duration for different scenarios
- Supply chain disruption potential
- Loss of key customer access
Most businesses discover they have exposures they didn't realize: supply chain dependencies on catastrophe-prone regions, business interruption durations that exceed policy time limits, or equipment that would take 12+ months to replace.
Strategy 2: Implement Catastrophe Risk Mitigation
The businesses that are getting the best insurance rates—or any coverage at all—are those that have invested in risk mitigation:
Wildfire mitigation (for properties in WUI zones):
- Create 100-foot defensible space (removing flammable vegetation)
- Install ember-resistant vents (embers cause 90% of wildfire structure ignitions)
- Upgrade to Class A fire-rated roofing
- Use fire-resistant materials for siding, decks, and fences
- Remove tree branches within 10 feet of structures
- Install dual-pane windows (provide some fire resistance)
Cost: $15,000-$45,000 for comprehensive wildfire hardening Insurance premium savings: 25-40% on property insurance Actual risk reduction: 75% reduction in wildfire loss probability
Wind mitigation (for hurricane and high-wind areas):
- Install impact-resistant roofing
- Add roof-to-wall hurricane clips/straps
- Install impact-resistant windows or storm shutters
- Reinforce garage doors
- Seal roof deck seams
- Install secondary water barriers
Cost: $8,000-$35,000 depending on building size and current condition Insurance premium savings: 20-35% on property insurance Actual risk reduction: 60% reduction in wind damage severity
Flood mitigation:
- Elevate critical equipment above base flood elevation
- Install flood barriers or shields
- Improve drainage systems
- Seal basement walls and floors
- Install backflow preventers
- Relocate valuable inventory to higher floors
Cost: $5,000-$50,000 depending on measures implemented Insurance impact: Can make difference between coverage available or declined Actual risk reduction: 40-70% reduction in flood damage
Hail mitigation:
- Install Class 4 impact-resistant roofing shingles
- Park vehicles in covered areas during hail season
- Install hail screens over expensive equipment
Cost: $3,000-$15,000 for Class 4 roofing upgrade Insurance premium savings: 15-25% in hail-prone areas Actual risk reduction: 90% reduction in hail damage to roof
Strategy 3: Structure Your Insurance Program to Manage Catastrophe Exposure
Rather than simply buying the highest limits possible, structure your insurance program strategically:
Layer your coverage:
Primary layer: Traditional property insurance with manageable deductibles covering most non-catastrophe losses Excess layer: Higher-limit catastrophe coverage (may be separate policy or endorsement) Parametric layer: Fast-payout parametric coverage for business interruption and critical expense coverage
Example structure for a $10M property value business:
- Primary property policy: $10M limit, $25,000 deductible, excludes named storm/flood
- Hurricane/Named storm policy: $10M limit, 3% deductible ($300,000)
- Flood policy: $5M limit, $100,000 deductible
- Parametric wind coverage: $500,000 payout if Cat 3+ hurricane winds hit location
- Parametric BI coverage: $1M payout if business closed more than 30 days due to covered catastrophe
Total cost: Approximately 30% less than buying all coverage in a single high-limit traditional policy, with better protection for business interruption.
Strategy 4: Understand and Manage Your Supply Chain Catastrophe Risk
Your business can be destroyed by catastrophes that don't touch your property—if they impact your critical suppliers or customers.
2025 examples:
- Automotive parts supplier in Ohio shut down for 6 months when their sole-source supplier in Texas was destroyed by a tornado
- Restaurant chain in Arizona closed 8 locations permanently when produce suppliers in California couldn't deliver due to wildfire disruptions
- Manufacturer in Pennsylvania filed bankruptcy when hurricane damage in Louisiana shut down their chemical supplier indefinitely
Supply chain catastrophe risk management:
- Map your critical dependencies: Identify suppliers, logistics providers, utilities, and customers whose failure would shut down your operations
- Assess their catastrophe exposure: Where are they located? What catastrophe risks do they face?
- Diversify geographically: Avoid concentrating critical suppliers in single catastrophe-prone regions
- Require supplier catastrophe planning: Ask suppliers about their disaster recovery capabilities
- Secure contingent business interruption coverage: Insurance that pays when you lose income because a supplier or customer suffers a covered catastrophe loss
Strategy 5: Build Adequate Financial Resilience
Insurance may not be enough. Businesses need financial reserves to handle:
- Large deductibles ($100,000-$500,000+ is common for catastrophe coverage)
- Uninsured losses (exclusions, sublimits, policy gaps)
- Coverage disputes and delays (insurers may take 6-24 months to settle complex catastrophe claims)
- The protection gap (if your property is in a high-risk area, coverage may become unavailable)
Financial resilience strategies:
Catastrophe reserve fund: Set aside 3-6 months of operating expenses plus your largest potential deductible Credit facilities: Establish lines of credit you can access immediately post-catastrophe Business interruption reserves: Maintain cash reserves to cover 60-90 days of expenses without income Parametric insurance: Provides fast cash to bridge the gap until traditional insurance pays
What's Coming: Catastrophe Loss Projections for the Next Decade
Climate scientists and catastrophe modelers project that 2025's record losses may become routine:
Swiss Re's 10-year outlook (2025-2035):
- Average annual insured catastrophe losses will reach $120-150 billion by 2035 (50-88% increase from 2025)
- Severe convective storm losses will triple (from $42B in 2025 to $120-140B by 2035)
- Wildfire losses will increase 200-300% as development continues in WUI zones
- Flood losses will double as climate change intensifies precipitation events
- Protection gap will widen to 65-70% of total economic losses (from 58% in 2025)
Key drivers:
- Climate change: Warmer atmosphere holds more moisture, creates more energy for storms, alters precipitation patterns
- Development patterns: Continued building in high-risk areas (coastal zones, wildfire interfaces, floodplains)
- Inflation: Reconstruction costs rising faster than general inflation, increasing loss severity
- Economic growth: More valuable property and equipment at risk
Insurance market implications:
- Property insurance will become unavailable in highest-risk areas
- Premiums in moderate-risk areas will increase 10-15% annually
- Deductibles will continue rising (7-10% of property value for catastrophe perils may become standard)
- Government insurance programs will expand (and struggle financially)
- Alternative risk transfer will grow (parametric, catastrophe bonds, risk retention groups)
Preparing for a High-Catastrophe Future
The 2025 catastrophe season represents a turning point. Losses that were once extraordinary are becoming routine. Property insurance that was once affordable and readily available is now expensive and difficult to obtain.
Businesses and property owners must adapt:
- Accept that catastrophe risk is increasing: Climate change is real and is fundamentally altering hazard patterns
- Invest in risk mitigation: Physical protective measures reduce both insurance costs and actual loss potential
- Structure insurance strategically: Use layered programs, parametric coverage, and high deductibles to manage costs
- Build financial resilience: Insurance won't cover everything; you need reserves
- Understand your total exposure: Include supply chain, business interruption, and indirect impacts in your risk assessment
The businesses that thrive in the coming decades will be those that recognize catastrophe risk as a core business challenge—not just an insurance purchasing decision. Risk management, business continuity, financial planning, and insurance must work together.
Most importantly: don't wait for the next catastrophe to discover your coverage is inadequate. The time to evaluate and improve your risk profile is before the storm, not after.
Concerned about how catastrophe risk affects your business? Understanding your property's exposure to natural disasters and structuring appropriate coverage is critical as climate-driven losses accelerate. Work with risk management professionals who can help you assess hazards, implement mitigation measures, and design insurance programs that actually protect your business—not just check a compliance box.
Sources: Swiss Re sigma October 2025, Insurance Information Institute, NOAA National Centers for Environmental Information, Nature Climate Change