FT: World faces $450 billion annual bill from natural disasters

Natural disasters are expected to cost the world about $450 billion in a typical year, with up to 62% of losses not covered by insurance, according to new research from risk-modelling firm Verisk.

The figures reflect the growing impact of climate change and urban expansion, which have placed more property at risk, while construction costs have also risen, The Financial Times reports.

Verisk estimates that uninsured losses could reach about $279 billion in an average year, with losses significantly higher in the most severe disaster years.

The insurance industry is also facing rising catastrophe-related costs while covering a shrinking share of overall damage.

Global insured losses exceeded $100 billion for the sixth consecutive year in 2025. Insurers faced record-setting claims from California wildfires and severe thunderstorms, despite no hurricane making landfall in the continental US.

Insurers have responded to rising costs by tightening policy terms and excluding some risks from standard cover. Major carriers have also stopped renewing policies in some high-risk areas.

In emerging markets, where insurance coverage is often limited, homes and businesses can face particularly large uninsured losses.

An earthquake in Myanmar in March 2025 caused about $12 billion in damage, while insurers covered less than $100mn, according to Verisk.

Flooding in Texas in July 2025, which killed more than 130 people, was expected to cause $1.1 billin in losses. Most of the damage was uninsured because flood cover is excluded from standard US homeowners' policies.

The wildfires in Los Angeles in January 2025 caused up to $65 billion in economic losses. Verisk said as many as 35% of properties lacked insurance, partly because major insurers had reduced their exposure to California.

Many affected homeowners were instead pushed towards California's state-backed insurer of last resort, the Fair Plan.

State Farm, the largest property and casualty insurer in the US, said in 2024 that it would not renew policies for 72,000 property owners in California.

Progressive has also reduced its exposure to storm and wildfire risks, while increasing its business in areas with lower weather-related risks.

Insurers “pull back from areas that they don’t want to insure anymore, dump that risk on to governments and private individuals, break local markets and then jack up their rates. That’s a pattern,” said Pete Sikora, a senior adviser for activist group New York Communities for Change.

By Aghakazim Guliyev