Insured catastrophe losses in Australia reached US$2.9 billion in 2025, according to new analysis from Aon plc, with the report warning that ongoing climate risks and exposure growth could continue to pressure insurance affordability.
The firm’s 2026 Climate and Catastrophe Insight report shows that Ex-Cyclone Alfred was the largest insured loss event of the year, generating about US$1 billion in claims.
The report notes that catastrophe losses can change significantly from year to year. Long-term climate trends, growing development in hazard-prone areas and pressure on insurer balance sheets are among the factors shaping those outcomes.
Tom Mortlock, head of climate analytics for Asia Pacific at Aon, said these trends are contributing to a long-term rise in losses.
“Year-to-year catastrophe losses can be highly volatile. Multiple studies suggest that urbanisation in increasingly hazardous areas is a significant underlying driver of the multi-decadal loss trend,” he said. “That continued exposure growth, combined with broader cost pressures, helps explain why insurance affordability remains a key issue.”
The report also places Australia’s losses within a broader global trend. Worldwide insured losses from natural disasters reached US$127 billion in 2025, marking the ninth consecutive year that insured losses have been above the long-term average. Total economic losses were estimated at US$260 billion, the lowest level recorded since 2015.
However, a large portion of those losses remained uninsured. Insurers covered nearly half of global economic losses, leaving a protection gap of 51%, the lowest level recorded so far. In Asia, the gap is much wider, with more than 90% of assets estimated to be uninsured against climate and catastrophe risks.
The report says this protection gap affects how quickly communities and businesses recover after disasters and can influence long-term access to insurance. While Australia has higher insurance coverage than much of the Asia-Pacific region, the findings suggest that hazard trends still raise concerns about resilience, affordability and the sustainability of coverage.
“Insurance affordability and access remain important issues in Australia. Even in a softer market, where risk is not well differentiated, communities and businesses can still face a widening gap between economic losses and what is actually insured due to a combination of both climate and non-climate factors,” Mortlock said.
Several catastrophe trends also shaped global losses in 2025. Severe convective storms produced US$61 billion in insured losses worldwide, overtaking tropical cyclones as the costliest insured peril of the 21st century. Natural disasters also resulted in 49 economic-loss events exceeding US$1 billion, showing the cumulative effect of frequent mid-sized catastrophes.
Wildfires in California were among the most expensive disasters of the year, causing US$58 billion in economic losses and US$41 billion in insured losses, making them the costliest wildfires recorded globally.
Globally, disaster-related fatalities reached 42,000, which was mainly driven by earthquakes and heatwaves and 45% below the 21st-century average. The earthquake in Myanmar was the deadliest event aside from heatwaves, resulting in 5,456 deaths. Extreme heat caused more than 25,000 deaths worldwide, with 2025 ranking as the third-hottest year on record.
The report also highlights a shift in how climate risk is being assessed. For the first time, the 2026 edition includes forward-looking climate projections using Aon’s physical climate risk modelling tool, Climate Risk Monitor.
“This marks an important shift from retrospective analysis of historical losses to a forward-looking assessment of where risk is emerging and intensifying. Improved climate and risk data supports earlier, more informed decision-making beyond reactive responses to loss events,” Mortlock said.
“Integrating climate risk into core strategy is critical for Australian organisations planning for long-term resilience. This is particularly important with the advent of mandatory climate reporting in Australia.”
