Once considered background noise to the world’s major catastrophes, secondary perils like wildfire, flooding, and severe storms have become one of the insurance industry’s biggest headaches.
New data from AM Best show they now drive the majority of global insured catastrophe losses – and Canada is feeling the full force of that shift.
Long treated as routine weather risks, these smaller-scale disasters are now delivering outsized financial shocks and driving volatility across underwriting portfolios. “These used to be considered low-severity, high-frequency events,” said Michael Buckley (pictured), financial analyst at AM Best. “But they’re becoming the primary loss drivers.”
For decades, insurers built their catastrophe models around “primary perils” – hurricanes, earthquakes, and other massive, well-understood events. Those still matter, but the financial toll of smaller, faster, and more frequent disasters has eclipsed them.
Global insured catastrophe losses hit US$145 billion in 2024, the sixth-highest annual total ever recorded. What would once have been considered an exceptional loss year is now ordinary. “We’ve had nearly eight years over $100 billion in insured losses,” Buckley noted.
Even as the industry’s capacity has grown, the protection gap remains stubbornly wide – only about 40% of global economic losses were insured last year. The exposure curve has simply outpaced the industry’s ability to price and transfer risk.
AM Best’s data show a sharp rise in both the frequency and severity of billion-dollar loss events. In 2024 alone, there were 34 separate insured catastrophes exceeding US$1 billion each. While hurricanes Milton and Helene accounted for US$37.5 billion in insured losses, secondary perils still made up more than half of all global insured catastrophe losses.
Severe convective storms in the US and widespread flooding in Europe dominated, exposing insurers to losses that often fall below traditional reinsurance treaty attachments, leaving more of the cost on primary carriers’ books.
Canada’s catastrophe record now reads much like the global one – more frequent, more expensive, and more complex.
AM Best’s figures show cumulative insured catastrophe losses in Canada surged from $10.7 billion (2010–2014) to $20.9 billion (2020–2024). The number of catastrophe events climbed from 31 in the early 2000s to 65 in the past five years.
The 2024 season alone generated around $9 billion in insured losses, a national record. Four separate billion-dollar events – the Jasper wildfire, Calgary hailstorm, remnants of Hurricane Debby, and Ontario flash flooding – all stemmed from secondary perils.
Wildfire, in particular, is fast becoming Canada’s defining hazard. While the number of individual fires hasn’t increased significantly, the area burned has exploded, reaching 17 to 18 million hectares in 2023 and another 7.5 million hectares burned by mid-2025 – double the pace of the previous year.
The causes are intertwined and compounding.
Buckley pointed to climate change as the foremost driver, with Canada warming faster than the global average. Warmer air holds more moisture, producing heavier rainfall and flash floods, while also fuelling drought and lightning activity that intensify wildfires.
But the problem extends beyond climate. Population growth and suburban sprawl have expanded exposure footprints, while deferred maintenance, supply chain shortages, and aging urban infrastructure have left buildings and drainage systems unprepared for modern weather extremes.
Even wildfire suppression strategies are backfiring, with decades of fuel accumulation creating conditions for more volatile blazes. Inflation and rising construction costs further amplify each loss, ensuring even moderate events carry major price tags.
Despite the rising losses, the tools insurers use to understand these risks are still catching up. Traditional catastrophe models were built around rare, severe events — the one-in-100-year hurricane, not the string of wildfires or hailstorms that strike every season.
Buckley said carriers increasingly need property-level granularity to understand exposure. Reinsurers are developing proprietary, blended models that integrate local hazard data, global climate information, and geospatial imagery. Artificial intelligence is also helping to patch data gaps. “You can’t just rely on one model,” he said. “Companies are beginning to use blended models.”
Buckley highlighted a range of approaches emerging across the industry to mitigate and adapt to the growing peril load.
Improved risk modeling and richer data analytics are at the core, supported by public-private partnerships aimed at climate adaptation and infrastructure resilience. Programs like Canada’s forthcoming national flood insurance initiative signal growing policy alignment.
On the consumer side, insurers are increasingly using education and mitigation incentives – from flood retrofit subsidies to wildfire-season awareness campaigns – to encourage proactive risk reduction. Reinsurers, meanwhile, are experimenting with alternative capital such as catastrophe bonds and insurance-linked securities to diversify exposure.
As Buckley put it, the industry is learning that secondary perils “need to be integrated throughout the insurance value chain” – from underwriting and claims to capital management and customer engagement.
