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Severe Convective Storms: A New Financial Reality

Aon plc, a global leader in professional services, recently released its annual Climate and Catastrophe Insight report, shedding light on a startling trend in natural disaster losses. According to the findings, severe convective storms (SCS) have eclipsed tropical cyclones, establishing themselves as the most expensive insured peril of the 21st century.

The 2025 global economic losses due to natural disasters hit a staggering $260 billion. However, despite this being the lowest figure since 2015, insured losses remained significantly elevated at $127 billion. This marks the sixth year in a row where insurance payouts exceeded the noteworthy $100 billion mark. Such numbers highlight the stark contrast between economic losses and the proportion that is insured, indicating a notable trend of concentrated peril events predominantly impacting the United States, ultimately driving up insured losses even during years of generally lower hazard occurrences.

In many areas around the globe, especially in emerging markets, it is profoundly troubling that over half of the economic losses remain uninsured, leaving millions in precarious financial positions. This situation begs for innovative solutions as organizations strive to adapt to varying risk landscapes. Aon emphasizes the importance of quantifying investments in mitigation measures. By demonstrating credible reductions in potential losses to both insurers and capital providers, organizations can improve how they finance risks, opening doors to more affordable, sustainable insurance options.

Highlights from Aon’s report reveal the critical need for collaboration among various stakeholders, including organizations, insurers, governments, and local communities. Aon’s CEO, Greg Case, underscored the insurance sector's pivotal role in navigating the changing climate, stating, "The insurance industry is well-positioned to act as a strategic partner to help navigate these challenges, bringing record levels of capital to help clients respond to weather risks."

Key Findings

Here are some of the report’s most crucial insights:

1. Rising Costs from Severe Convective Storms: In 2025, severe convective storms were responsible for $61 billion in insured losses globally, making it the third-highest loss total on record for this peril.
2. Protection Gaps: Insurers accounted for nearly half of total global economic losses, but the protection gap remained stark, with a 51% deficit, attributed largely to concentrated events in the U.S.
3. Frequency of Billion-Dollar Events: In 2025, there were 49 economic events leading to losses exceeding $1 billion – notably above the long-term average of 46, and there were 30 insured-loss events surpassing that billion-dollar mark, significantly exceeding the historical average of 17, illustrating the growing impact of frequent medium-sized catastrophes.
4. Impact of Wildfires: Events such as the California wildfires (Palisades and Eaton Fires) emerged as the most costly incidents of the year, incurring $58 billion in economic losses and $41 billion in insured losses, marking a historic high.
5. Fatalities and Climate Trends: Globally, total fatalities from natural disasters reached 42,000, primarily due to earthquakes and extreme heat, while the year 2025 stands as the third hottest on record, unfortunately attributing to over 25,000 deaths.

Regional Insights

The report delves deeper into regional trends:

• - United States: Over 54% of global economic losses occurred here, with wildfires and SCS being the main contributors. Insured losses alone reached $103 billion.
• - Americas: Hurricane Melissa emerged as the most costly event, with significant damage reported across Jamaica, Cuba, and beyond. Additionally, Brazil's agricultural sector faced crippling impacts due to drought.
• - EMEA Region: In this area, losses remained below long-term averages, with severe convective storms continuing to produce significant financial liabilities.
• - APAC: Here, the Myanmar earthquake stood out as the deadliest event, sustaining considerable economic damages. Floods and cyclones in several countries further exacerbated financial strains.

The report also notes an increasing necessity for alternative risk transfer solutions to offer the capital required to aid organizations in managing risk and building resilience. Products like parametric insurance, which automatically release funds under specified conditions, have become vital in events like Hurricane Melissa, enabling rapid recovery. For instance, Jamaica was able to secure over $650 million in liquidity within months of the hurricane making landfall.

As Aon suggests, resilience must now encompass both physical and financial dimensions. Companies are encouraged to enhance technology deployment and fortify infrastructures while improving forecasting models. This proactive strategy aims not only to mitigate immediate damage but to foster quicker recovery for communities and businesses alike.

"In today's climate, resilience should be interwoven into both workforce strategy and location decision-making," emphasizes Michal Lorinc, head of catastrophe insights at Aon. As societies continue to face the ramifications of unprecedented climate events, the focus must shift towards leveraging data to fortify preparedness, rethink risk strategies, and foster partnerships for rapid recovery and long-term resilience.

For further insights, readers can access the entire 2026 Climate and Catastrophe Insight report through Aon’s official channels.