2025 Natural Catastrophe Report: A Year of Low Losses but Rising Risks
Gallagher Re’s recent Q3 Natural Catastrophe and Climate Report presents an intriguing paradox for the insurance industry in 2025. Despite a notable decrease in natural catastrophes, experts caution against complacency regarding potential volatility in future events.
Insured Losses Decline in 2025
According to the report, insured losses for the third quarter of 2025 totaled approximately $15 billion, marking the lowest figure since 2016. This brought the total global insured losses for the first nine months of 2025 to $105 billion, which is 8% below the decade average.
Economic Losses: A Sharp Contrast
While insured losses were down, it’s important to note that this year marks the sixth consecutive year with losses exceeding $100 billion. Economic losses from January to September reached an estimated $214 billion, significantly less than the decadal average of $338 billion.
Q3 Losses: A Historical Perspective
The third quarter of 2025 produced fewer than $50 billion in total losses, making it the lowest third-quarter result since 2006. This quarter typically registers the highest costs associated with natural disasters.
Major Catastrophic Events of 2025
Despite the overall decline in catastrophes, some significant events have still generated large losses.
The Costliest Disasters
The Palisades and Eaton wildfires in California accounted for $65 billion in economic damage and $40 billion in insured losses. Additionally, the U.S. registered 18 billion-dollar events, primarily due to severe convective storms. On a global scale, a $15 billion earthquake in Myanmar was noted as the most costly non-U.S. event.
Climate Change Signals and Rising Temperatures
The report emphasizes alarming climate trends, with global surface and ocean temperatures from January to September ranked as the second warmest on record. Gallagher Re highlights that extreme heat poses risks beyond conventional catastrophe modeling, including:
- Grid failures
- Data center vulnerabilities
- Soil subsidence
- Broader impacts of heat stress
The Industry’s Response to Climate Risks
Given these risks, Gallagher Re urges insurers and reinsurers to invest in advanced analytics and tailored frameworks that can address these emerging threats.
Volatility Ahead: Bridging a Changing Landscape
Steve Bowen, Gallagher Re’s Chief Science Officer, pointed out that the year has been “top heavy,” with just five catastrophic events accounting for over 54% of global insured losses. He advises the industry to prepare for continued volatility, as the nature of hazards may be changing.
Looking Forward: The Importance of Q4
As we approach the final months of 2025, Bowen posits if Q4 remains manageable, it could significantly strengthen the financial standing of the (re)insurance industry. He noted a shift in averages, with the five-year annual insured loss increasing to $155 billion, compared to $135 billion over the past ten years.
Conclusion: A Cautious Outlook
In summary, while 2025 has shown lower insured and economic losses compared with previous years, Gallagher Re’s report highlights that the landscape of natural disasters is evolving. The risks associated with climate change, coupled with increasing event volatility, signal a need for cautious optimism in the insurance sector as it prepares for the challenges that lie ahead.
Key Takeaway
Insurers should leverage advanced analytics and innovative risk management strategies to navigate this complex landscape of changing climatic conditions. The enduring challenge will be to address the growing protection gaps while also preparing for the unprecedented risks that increased temperatures and shifting geographical patterns may bring.
