Despite a slight dip in headline catastrophe losses, 2025 should not be mistaken for a year of reduced risk. That was the central message from leaders at Aon during a virtual briefing accompanying the release of its latest Climate and Catastrophe Insight Report this week.
Global economic losses from natural disasters reached approximately $260 billion in 2025, below the 21st-century average. Insured losses, however, totaled around $120–$127 billion, marking the sixth consecutive year above the $100 billion threshold.
“Some may view 2025 as a relatively ‘quiet’ year,” said Michal Lorinc (pictured on the left), head of catastrophe Insight at impact forecasting at Aon, during the briefing. “However, we strongly caution against complacency. Any temporary dip in activity does not change the long-term trend of increasing losses driven by extreme events and the growing concentration of risk.”
According to Aon’s data, nearly half of all global economic losses took place in the United States, where insurance penetration remains comparatively high. This geographic concentration pushed the global protection gap to a record-low 51%.
But this narrowing gap was largely circumstantial. In many emerging markets, the majority of catastrophe losses remain uninsured, highlighting ongoing challenges and opportunities for insurers and brokers working with multinational clients or public-sector risks.
One of the most consequential findings for the market is that severe convective storms (SCS), including hail, straight-line winds and tornadoes, have now surpassed tropical cyclones as the costliest insured peril of the 21st century. In 2025 alone, SCS generated roughly $61 billion in insured losses globally, with the majority occurring in the US.
A total of 49 disasters worldwide caused more than $1 billion in economic losses last year, slightly above the long-term average. More striking for insurers and reinsurers, however, were the 30 billion-dollar insured loss events, nearly double the historical average of 17.
Wildfire also remained a defining peril. The California wildfires in January 2025 were the costliest events of the year, causing an estimated $58 billion in economic losses and $41 billion in insured losses, making them the most expensive wildfires ever recorded globally.
Global temperatures in 2025 reached approximately 1.4°C above pre-industrial levels, putting the world near the Paris Agreement’s 1.5°C threshold. Current trajectories suggest nearly 2°C of warming by century’s end, with material implications for flood, heat, drought and wildfire risk.
In the US, flood exposure is projected to rise by about 15% over the next 20 years, bringing risk to communities with little historical experience of flooding.
Heatwaves in Europe, while less destructive to property, caused at least 24,000 deaths in 2025 and the was the top global human loss event for the year, following by the Myanmar eathquakes (more than 5,400 fatalities).
Despite persistent large losses, Aon leaders said the insurance and reinsurance markets functioned effectively in 2025. Total industry capital grew by about 6% through the first nine months of the year, reaching an estimated $760 billion, supported by several years of strong underwriting performance.
“The capital available across insurance, reinsurance, and insurance-linked securities (ILS) largely met demand from corporates, consumers, and insurers,” said Richard Pennay (pictured on the right), CEO of Aon Securities.
“Even with losses of this magnitude, the industry can still produce profitable years… Losses at the $100 billion level are now largely priced into the system, thanks to disciplined underwriting and adequate pricing.”
Pennay highlighted the rapid expansion of insurance-linked securities (ILS), particularly catastrophe bonds, which continue to outpace traditional reinsurance growth. Since 2022, the cat bond market has expanded from roughly $35 billion to about $60 billion, with more than $24.5 billion issued in 2025 alone.
Governments and public-sector entities are increasingly turning to capital markets for protection. Following the January wildfires, the California FAIR Plan placed a $750 million wildfire catastrophe bond, while Jamaica recovered $150 million through a parametric cat bond after a major hurricane, along with additional liquidity from other parametric solutions.
“These events highlight the expanding role of capital markets in supporting resilience against climate-related risks,” Pennay said.
