Zurich has called on governments to prioritise resilience policies and work with the private sector amid escalating natural catastrophe insured losses.

“The Los Angeles wildfires at the start of 2025 were a stark reminder of the threat that extreme weather and natural catastrophes pose,” the insurer says in a report. “They demonstrated that even the wealthiest nations are unprepared for the impact of increasing climate risks.”

In inflation-adjusted terms, global average insured losses increased 5.9% a year between 1994 and 2023 while GDP rose 2.7% a year, the report says.

“If insured losses continue to grow at this rate, premiums for climate risk coverage will need to increase to reflect the additional risk. This, in turn, will affect the level of protection that individuals and businesses are willing and able to purchase, with potential consequences for the overall functioning of the market.”

The insurance industry cannot act alone and a co-ordinated approach between private and public sectors is required, Zurich says.

The report calls for investment in risk prevention and reduction strategies, enhanced market accessibility and affordability through supportive policy frameworks, and public-private solutions including “blended finance” and other arrangements.

Zurich Australia and New Zealand head of general insurance Alex Morgan says extreme weather’s impact on the Australian economy has more than tripled over three decades.

“These events are no longer once in a century, they are the status quo, and communities are not adequately prepared or protected,” he said.

“The insurance industry is uniquely positioned to provide risk intelligence and resilience-based solutions to growing climate risk. However, it is just one part of the solution.”

The report says climate resilience should be integrated into national planning, and technology and data should be used to better understand risks and foster community preparedness.

Governments can raise awareness of weather risks and offer incentives for households and businesses to obtain adequate cover, while climate data should be shared and industry expertise leveraged to build back better, it proposes.

Zurich warns against regulating premiums and highlights the importance of risk-based pricing.

It says it is crucial that governments do not introduce solutions that displace private insurance, but notes options can be structured to manage large-scale losses without destabilising markets.

“Stable premiums and the continuity and accessibility of natural catastrophe insurance can be achieved through risk-sharing solutions, such as public-private partnerships and the use of reinsurance, capital markets and, under the right circumstances, insurance pools.”

Extreme weather events such as hurricanes, floods and wildfires caused about $US2 trillion ($3.1 trillion) of economic losses over the past decade, according to the International Chamber of Commerce.

The Zurich report – titled Climate Risks: Strategies for Building Resilience in a Volatile World – is available here.

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