Concerns over the impact of climate change on reinsurance industries are underlined by experts, they argue

The concentration of risk in a small number of reinsurers and jurisdictions has raised concerns about potential threats to financial stability. This is particularly evident in the face of increasing climate-driven natural disasters, which are causing unpredictable insurance costs and sparse coverage in high-risk regions.

Reinsurance, which acts as insurance for the insurers, is at the heart of this issue. The reinsurance sector is facing an increasing insurance protection gap, as losses from extreme weather events continue to rise. Over the last 40 years, insurance losses from these events have reached a staggering total of US$6.9tn, according to Munich Re.

Extreme weather events, such as hurricanes, wildfires, severe convective storms, and atmospheric rivers, are becoming more frequent and intense, causing heavy rains and flooding. In 2024, these events accounted for 90% of US losses.

Some reinsurers have policies that curtail reinsurance for fossil fuel projects, but these policies often only apply to single-site insurance rather than company-wide contracts. This leaves a significant gap in insurability, particularly for industries heavily reliant on these energy sources.

Dave Jones, former California insurance commissioner, has emphasised this point, stating, "There's no get out of climate change free card in the United States, or globally."

The key regulators in the USA attentive to growing climate risks and related insurance damages include state insurance departments and federal agencies involved in disaster management and financial oversight. However, existing regulatory frameworks and risk models are criticised for being outdated or insufficient. Traditional risk calculation methods fail to account for increasing climate-driven natural disasters, making insurance costs unpredictable and coverage sparser in high-risk regions.

Some insurance and reinsurance firms have left voluntary net-zero commitment groups, citing legal and regulatory concerns as the reason for withdrawing. This lack of attention from federal regulators in the US is having a "chilling effect" on the public commitments reinsurers and insurance firms are making.

Climate scientists warn of potential climate tipping points, and Marina Baldissera Pacchetti, a climate science philosophy research fellow at University College London, has urged insurance firms to take responsibility in the insurability gap.

To address this issue, some suggest rethinking how climate risks are presented, such as through local environmental concerns, to encourage reinsurers to act more responsibly. Dave Jones also suggests that the state should play a role in ensuring coverage is provided, but it's important that solutions are designed equitably.

Insurance and reinsurance companies, as profit-driven entities, could potentially conflict with the values of those who can't be insured. It's crucial that these organisations find a balance between their objectives and their responsibility to protect policyholders from the impacts of climate change.

This page was last updated on August 21, 2025.

Concerns over the impact of climate change on reinsurance industries are underlined by experts, they argue