Global insured losses from natural catastrophes reached $107 billion in 2025, according to Swiss Re Institute's sigma report on natural catastrophes, sigma 1/2026. The total came from 190 qualifying events. So-called secondary perils, such as severe convective storms, wildfires and floods, accounted for a record 92% of insured losses, Swiss Re said.
The Los Angeles wildfires in January 2025 were the largest single loss event of the year, with insured losses of about $40 billion. The total for the year was below the long-term trend, largely because no major hurricane made landfall in the United States in 2025.
Looking ahead
Swiss Re projected insured natural catastrophe losses of $148 billion for 2026 under trend conditions, reflecting growth in exposure, urban expansion into risky areas, inflation in rebuilding costs and climate-related changes in hazards. In a peak loss scenario, such as a major hurricane striking a densely populated area, it estimated losses could reach $320 billion.
What secondary perils are
Insurers distinguish between primary perils, such as tropical cyclones and earthquakes, which can cause extremely large losses in a single event, and secondary perils, which are generally smaller but more frequent. Severe convective storms, which bring hail, tornadoes and damaging winds, have become the largest source of insured losses in many years, particularly in the United States. Wildfires have also grown as a source of loss, with large events in California, Canada, Australia and southern Europe.
Swiss Re and other insurers have pointed to several drivers of rising secondary peril losses. Population and property values have grown in exposed areas such as the wildland-urban interface in the western United States. Construction costs have risen. Climate change is contributing to more extreme heat, drier vegetation in some regions and heavier rainfall, which affect the frequency and severity of wildfires and floods.
The Los Angeles fires and utilities
The Los Angeles fires had direct consequences for the energy sector. The Eaton fire, one of the two largest fires, has been linked to equipment owned by Southern California Edison. The US Department of Justice filed suit against SCE in September 2025 seeking damages related to the fire, and the utility faces numerous lawsuits from property owners and insurers seeking to recover claims paid. California's wildfire fund, created in 2019 to help utilities pay wildfire claims, was replenished by legislation in 2025.
Utility wildfire liability has become a major concern for investors and regulators in the western United States. Under California's doctrine of inverse condemnation, utilities can be held liable for damage caused by their equipment even without negligence. Utilities have responded with large wildfire mitigation programmes, including undergrounding power lines, installing covered conductors and using public safety power shutoffs during high-risk weather.
Insurance costs for energy assets
For energy companies, rising catastrophe losses feed into higher insurance premiums for power plants, transmission lines, refineries and offshore facilities. Utilities in wildfire-prone areas have found it harder to buy liability insurance at affordable prices, and some have turned to self-insurance or captive insurers. Offshore oil and gas facilities in the Gulf of Mexico face premiums linked to hurricane risk.
Renewable energy projects are also exposed. Solar farms have suffered large hail losses in Texas and other parts of the US, and insurers have tightened terms for solar projects in hail-prone areas. Wind farms face risks from storms and extreme cold. Insurance costs are becoming a more significant factor in project economics, and developers are paying more attention to site selection and hardened equipment.
The protection gap
Swiss Re also tracks the protection gap, the share of economic losses not covered by insurance. Globally, a large portion of disaster losses remains uninsured, particularly in emerging markets. In countries such as Pakistan, where floods in 2022 caused losses estimated at more than $30 billion, very little was insured. Closing the protection gap is a focus of climate finance discussions, including through parametric insurance schemes and regional risk pools.
Reinsurance market
The reinsurance market, which insures the insurers, hardened sharply in 2023 after several years of high losses. Reinsurers raised prices and attachment points, meaning primary insurers retained more of the smaller losses. Since then, strong reinsurer profits and fresh capital have eased conditions somewhat.
Catastrophe bonds, which transfer risk to capital market investors, have grown to record levels. Some utilities have used catastrophe bonds to cover wildfire risk. PG&E and other California utilities have accessed the market for wildfire and earthquake coverage.
Severe convective storms and the grid
Severe convective storms are a growing concern for power networks as well as insurers. Hail can shatter solar panels, while straight-line winds and tornadoes bring down transmission towers and distribution poles. In the central United States, derechos, long-lived lines of severe thunderstorms, have caused widespread outages in recent years. Utilities in the Midwest and the Plains have increased spending on stronger poles, faster restoration and network automation in response.
Because convective storms are local and frequent, their losses add up across many events rather than arriving in a single catastrophe. That pattern makes them harder to price and to transfer to reinsurers, which typically cover losses above a high threshold from a single event. Primary insurers and self-insured utilities therefore bear more of the cost directly.
Data and modelling
Insurers rely on catastrophe models to estimate expected losses and set prices. Models for secondary perils have historically been less developed than those for hurricanes and earthquakes. The industry has been investing in better hail, wildfire and flood models, often incorporating climate projections. Energy companies increasingly use similar tools to assess the physical risk to their assets, and regulators in some jurisdictions now ask utilities to file climate vulnerability assessments.
Implications for energy markets
Catastrophe losses affect energy markets through several channels. Physical damage to infrastructure can disrupt supply, as when hurricanes shut Gulf of Mexico production and refining. Higher insurance and financing costs raise the cost of capital for energy projects in exposed areas. Utility liabilities can affect credit ratings and the ability to invest. Regulators must decide how much of the cost of wildfire mitigation and insurance is passed on to customers.
What to watch
The Atlantic hurricane season begins on 1 June. Swiss Re's mid-year report will indicate how 2026 losses are tracking against its trend estimate. In California, the cause and liability findings for the Eaton fire and the operation of the replenished wildfire fund will be watched by utility investors.