Overview
Hurricane Melissa tore across Jamaica as a Category 5 storm and left behind a brutal reminder of who absorbs the worst climate shocks.
Damage estimates already reach into the tens of billions, yet fewer than 5% of properties carried meaningful insurance.
It’s a pattern playing out from the Caribbean to flooded towns in Southeast Asia: climate extremes intensify, but the financial tools that could help communities recover barely reach those who need them.
Disaster losses and global data
The World Bank estimates that more than 90% of disaster losses in developing countries go uninsured. Swiss Re puts the worldwide protection gap above $1.8 tn a year.
We see the world economy today as in need of a sustained reload in resilience. The value of unprotected risk exposure globally has risen steadily in the past five years.
The global protection gap measured at $1.8 tn in premium equivalent terms, a cumulative 20% increase on the comparable-terms $1.5 tn estimate for 2018
If climate adaptation is supposed to build resilience, then insurance – arguably one of the simplest mechanisms for transferring risk – sits strangely underused.
Amol Mehra of Laudes Foundation and Claire Harbron of the Howden Foundation argue that insurance should be treated as climate infrastructure.
They point to three routes that could shift access and impact, and philanthropy, they say, can make those routes viable.
One route is insurance aggregation
Low-income and informal workers rarely have access to tailored insurance, but when coverage is offered through cooperatives, credit unions or community groups, uptake changes.
In Southeast Asia, People’s Courage International works through agricultural cooperatives to sell weather-indexed insurance.
When rainfall drops below a preset threshold, payouts land automatically via mobile money. No paperwork, no adjusters, no delays. Farmers see the mechanism work in real time, which is how trust forms.
The same dynamic shows up in India through the global NGO Climate Resilience for All. Its partnership with SEWA provides parametric micro-insurance for 225,000 women working in the informal economy.
When extreme heat crosses agreed thresholds, benefits are triggered automatically. For workers who lose wages the moment temperatures spike, waiting weeks for a claim decision simply isn’t an option.
Philanthropy’s role here is to fund those aggregation systems, build the data layers and provide training so communities can plug into insurance markets that would otherwise ignore them.
Just 19% of respondents cite ESG compliance as a main concern, compared to 22% last year. Beazley warns that failure to address regulatory developments could lead to legal and financial consequences, including claims related to sustainability issues.
Insurers can help businesses prepare for environmental and regulatory threats. The report highlights the need for improved risk mapping, cross-border coverage, and data-based protection.
Strengthening internal risk management processes to address climate exposure, environmental liability, and regulatory change is also essential.
The report recommends a forward-looking approach. Businesses must consider environmental risk alongside financial pressure. Those without effective contingency plans for supply chain disruption and resource exposure may face severe operational issues and increased scrutiny from investors.
Insurance alone doesn’t deliver resilience
The second route is bundling. Insurance alone doesn’t deliver resilience; it softens the blow. When tied to climate-smart agriculture, early-warning tech or improved farming practices, the effect changes.
Humanity Insured has supported projects that combine crop insurance with agronomic advice, drought-resistant seeds and digital soil monitoring.
Farmers recover faster after a shock, but they also boost productivity, which makes long-term premiums more affordable.
Blue Marble uses a different bundle – insurance connected to satellite data. Its parametric products pay out when rainfall or temperature data crosses certain levels, and the same infrastructure creates early-warning systems that help communities prepare before the damage hits.
Philanthropy can bankroll the research, help design the products and co-fund premium subsidies during early pilots until public or private actors can take them to scale.
The U.S. private flood insurance market has grown rapidly in recent years with generally favorable underwriting performance but remains a small segment relative to the overall property and casualty insurance industry, Fitch Ratings says.
In the US, flood insurance historically had low participation, with most policies purchased to meet mortgage requirements in high-risk areas, predominantly through the National Flood Insurance Program (NFIP).
Private residential flood policies in force (PIF) grew at a compound annual rate of 20% between 2020 and 2024, compared to a -2% rate for federal flood policies.
The US private flood insurance market is expanding, addressing the nation’s substantial gap between economic and insured losses from flood events, which remain largely underinsured despite being among the costliest risks for homeowners.
No insurance system can absorb the full cost of a warming world
The third route involves creating the right pull from governments and the private sector.
No insurance system can absorb the full cost of a warming world, but governments can weave insurance into national adaptation plans and align it with social-protection programs that already reach vulnerable households.
Co-financing also matters. When governments underwrite part of the risk, private insurers tend to step forward.
Companies have a stake, too. Weather volatility disrupts crops like coffee, cocoa and cotton, rattling supply chains and eroding worker income.
Insurance cushions those shocks and stabilises procurement, which is why corporates eventually pay attention once the evidence mounts.
Philanthropy can help by de-risking pilots, funding studies that show how insurance protects value chains, and pushing for reforms that turn successful experiments into permanent policy.
Laudes Foundation and Howden Foundation are working through ClimateWorks’ Adaptation and Resilience Collaborative to build out a new insurance-focused stream for exactly this purpose.
They’re trying to bring donors, policymakers and technical groups into the same room to align funding and turn scattered pilots into something with national reach.
Insurance won’t evolve into an inclusive climate tool on its own
But with targeted support, community-level aggregation, smart bundling and stronger public-private engagement, it can become a piece of the climate infrastructure that actually reaches the people who bear the brunt of the crisis.
Insurance once felt simple for affluent families. Now it’s a maze of digital, climate and legal threats that outpace the insurance coverage many believe they already bought. PRMA research shows a widening disconnect between what high net worth households fear and what their insurance policies actually protect, and the tension is getting louder across the market.
Primary insurers have varying levels of exposure to climate risk, with the property and casualty insurance markets in the US and Japan identified as the most sensitive to an increase in natural catastrophe claims, according to S&P.
The US and Japan have the largest natural catastrophe insurance markets worldwide, with insured annual catastrophe losses in the US reaching an average of $66.2 bn, outpacing Japan’s $6.6 bn.
The analysis concluded that most rated primary insurers are unlikely to face negative rating actions from a climate-related rise in claims costs over the medium term, although profitability may become more volatile.
We have expanded the insurance resilience indices with a new crop protection index, and have added the severe convective storm peril to our natural catastrophe index. We estimate about 43% of risk globally was unprotected by assets or insurance in 2024, improved from 46% a decade ago.
Climate change, ESG responsibilities and cyber risks are just some of the key concerns facing the insurance industry. Climate change, ESG, cyber and the continuing war in Ukraine remain centre stage for the insurance industry, creating both new opportunities for insurers and new challenges from a claims and coverage perspective.
FAQ
Because only a small fraction of properties carried meaningful insurance, the storm revealed how unprotected most households remain. Even as losses run into the tens of billions, fewer than 5% of properties had coverage capable of easing recovery, leaving communities to absorb almost all economic damage themselves.
The gap represents the share of disaster losses that go uninsured. In developing countries it exceeds 90%, and Swiss Re estimates a global annual shortfall above $1.8tn. As climate extremes intensify, uninsured losses grow faster than insurance uptake, widening the divide.
Aggregation lets cooperatives, farmers’ groups, credit unions and women’s associations buy coverage collectively. This makes policies affordable, improves trust and delivers fast parametric payouts, often through mobile money. When rainfall or heat crosses a threshold, money arrives automatically without claims paperwork.
Insurance softens the blow, but recovery and long-term resilience improve when it is bundled with climate-smart agriculture, early-warning tech, satellite data or agronomic training. Farmers rebuild faster and raise productivity, which makes premiums more sustainable over time.
Philanthropy can finance pilot programs, data platforms, community training and early premium subsidies. It can also support research and policy advocacy that help governments and insurers integrate climate insurance into national adaptation strategies and social-protection systems.
Escalating climate losses outpace what private insurers can sustainably cover. Governments must co-finance some risks, link coverage to national adaptation plans and use social-protection programs to reach vulnerable households. Corporates also have incentives to protect supply chains disrupted by climate volatility.
Catastrophe exposure in markets like the US and Japan increases volatility in claims costs, even if most insurers remain financially stable. The global protection gap reached about $1.8tn, and roughly 43% of risk worldwide remained uninsured. ESG pressures, cyber threats and geopolitical instability add additional stress to insurers already grappling with climate-driven losses.
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QUOTES: Amol Mehra – Director of Industry Programmes at Laudes Foundation, Claire Harbron of the Howden Foundation
by Nataly Kramer – Lead Insurance Editor at Beinsure Media
