While insured losses from natural catastrophes dropped in 2025 from 2024, Willis has warned that the apparent respite masks a structurally higher “risk floor” and more complex loss patterns for insurers, with risk management frameworks struggling to keep pace.
According to the company’s Natural Catastrophe Review, insured losses logged in 2025 exceeded US$100 billion even without a single hurricane making landfall in the US. That represents a US$40 billion drop from the losses logged in 2024. The report, produced with contributions from Willis Re, examines how underlying trends, structural pressures and systemic vulnerabilities are reshaping catastrophe risk management and capital deployment.
According to Willis, 2025 showed just how severe claims can become when key risk drivers align, using the Eaton and Palisades fires in the US as a case study. Prolonged drought conditions, amplified by global warming and the continued push of communities into the wildland-urban interface have long been expected to raise the probability and severity of catastrophic fires – but many portfolios and models still treat wildfire as a marginal peril.
The report urged insurers and reinsurers to treat wildfire as a core, volatility-driven peril rather than a secondary add-on. It argued that wildfire models must be recalibrated to reflect present-day exposure, incorporating detailed, asset-level characteristics, realistic replacement-cost assumptions and explicit treatment of mitigation measures such as defensible space and building standards.
For insurers, that means more granular underwriting, tighter accumulation management across regions and lines, and clearer risk-based pricing and terms for wildfire-exposed risks, the report said.
A second major theme is the growing impact of compound or cascading events where multiple perils hit in quick succession and challenge traditional event definitions, retentions and reinsurance structures.
Willis used Super Typhoon Ragasa in the Philippines as a case study, highlighting how disaster risk financing structures can be tailored to reduce the economic shock of a “cluster” of catastrophes rather than a single headline event. Super Typhoon Ragasa struck during the peak of tropical cyclone season as the country was still recovering from the damage caused by another typhoon, testing policy wording, reinstatement provisions and aggregate covers.
Willis said that cumulative damage from earthquakes on rain-saturated soil, or typhoons following seismic events, can drive complex claims, delayed settlements and disputes with policyholders over how losses should be classified and which deductibles or sub-limits apply.
In the North Atlantic, 2025 was the first year in a decade with no US hurricane landfalls – yet the basin still produced significant insured losses elsewhere, reminding carriers that exposure cannot be defined solely by US landfall statistics.
Willis’ report pointed to a warming ocean as a key driver shifting both the timing and intensity of storms, with the Caribbean singled out as increasingly exposed to more Category 5 systems over a longer season and with more rapid intensification risk.
Historically, major hurricanes forming in October were rare. As the North Atlantic has warmed, the atmospheric conditions that favor hurricane development are persisting later into the year, while the same warmth enables storms such as Hurricane Melissa, which struck Jamaica, to undergo rapid intensification close to land.
For insurers, that means catastrophe exposure models, aggregates and reinsurance programs that only focus on the “classic” peak season and US landfall scenarios may be underestimating risk in other territories, months and lines of business.
Willis also stressed that flood risk can no longer be treated as confined to formally mapped zones or riverine exposures. As the climate warms, flood and drought are becoming more intense, with the second half of 2025 marked by extreme or record‑breaking rainfall in multiple regions and a spike in non‑mapped losses.
The report also highlighted the growing prominence of pluvial flooding. Cyclone Senyar, Cyclone Ditwah and Typhoon Koto in Southeast Asia are cited as examples of events that brought severe surface water flooding to areas not typically considered high risk, challenging pricing, zoning and traditional flood exclusions.
Risk managers, Willis argued, should think far more broadly about exposure to “all types of high water” and revisit policy language, limits, sub‑limits and aggregation controls to ensure adequate protection against surface water and non‑mapped flood, while incentivizing physical mitigation by insureds.
Cameron Rye, director of natural catastrophe analytics at Willis Re, cautioned against reading too much comfort into the lower aggregate bill and warned that the industry may be benefiting from “good fortune rather than robust risk management.”
“Good luck is no substitute for sound strategy,” he said. “Even if 2025 can be described as a moderate loss year, catastrophe risk remains high, and physical risks continue to increase as the world warms.”
Rye urged insurers to act now to fortify their catastrophe risk management, underwriting and capital strategies.
“The path forward, given these trends, isn’t to walk away from risk, but instead to encourage investment in resilience and mitigation,” he said. “Risk managers and sustainability teams can protect business value by working together, supported by advances in modeling, pricing and risk awareness.”
