Severe Convective Storms Become the Costliest Insured Peril of the Century, Aon Reports
Aon plc (NYSE: AON), a leading global professional services firm, has released its annual Climate and Catastrophe Insight report, revealing that severe convective storms (SCS) have overtaken tropical cyclones as the costliest insured peril of the 21st century. This significant shift highlights the urgent need for enhanced physical and financial resilience amid increasingly severe weather events.
Overview of Economic Losses from Natural Disasters
In 2025, global economic losses due to natural disasters amounted to $260 billion, the lowest total recorded since 2015. However, insured losses were substantial, reaching $127 billion. This marks the sixth consecutive year where insurance payouts exceeded the $100 billion threshold. The disparity between economic and insured losses underscores the concentration of severe weather events, particularly in the United States, and reveals that in many regions, more than half of economic losses remain uninsured.
Key Findings from the Climate and Catastrophe Insight Report
- In 2025, severe convective storms generated $61 billion in insured losses globally, marking the third-highest total for SCS.
- Insurers covered 49% of global economic losses, creating a protection gap of 51%, the lowest on record.
- A total of 49 billion-dollar economic-loss events and 30 billion-dollar insured-loss events were reported, well above historical averages.
- Wildfires in California, notably the Palisades and Eaton Fires, resulted in $58 billion in economic losses and $41 billion in insured losses, making them the costliest wildfires ever recorded.
- Global fatalities reached 42,000, predominantly due to earthquakes and heatwaves, significantly below the 21st-century average.
Regional Trends in Economic Losses
The report also sheds light on regional patterns in economic losses:
- U.S.: Accounted for over 54% of total global economic losses, with insured losses peaking at $103 billion, or 81% of global industry losses.
- Americas: Hurricane Melissa was the costliest event, resulting in $11 billion in economic damages. South America also faced significant drought impacts.
- EMEA: Sustained economic losses were below long-term averages, with severe convective storms emerging as the leading peril.
- APAC: The Myanmar earthquake was particularly devastating, with $15.7 billion in economic losses, alongside significant flooding and cyclone impacts in the region.
The Importance of Alternative Risk Transfer
The 2026 Climate and Catastrophe Insight report emphasizes that alternative risk transfer solutions are increasingly vital for facilitating the capital needed to mitigate risks and enhance organizational resilience. Parametric insurance products, which automatically disburse funds when specific conditions are met, played a critical role during events such as Hurricane Melissa, resulting in rapid recovery efforts.
For example, Jamaica secured over $650 million in liquidity shortly after the disaster due to catastrophe bond protections linked to a parametric trigger.
Conclusion: Building Resilience Against Future Risks
As articulated by Michal Lorinc, head of Aon's catastrophe insight, "Resilience today must be both physical and financial." Organizations are encouraged to integrate adaptation into workforce strategies, invest in predictive analytics, and foster collaborative approaches to weather risk. With climate-related events continuously impacting communities and businesses, leveraging data will be essential to strengthen preparedness and enhance long-term resilience.