The latest natural catastrophe data from 2025 should prompt insurers to ask an uncomfortable question: are current underwriting frameworks, modelling tools and coverage structures fit for a risk environment that looks materially different from the one they were designed for?

The answer, on the evidence, is increasingly no. Secondary perils are no longer a rounding error in catastrophe budgets - they are the dominant driver of insured losses - and the modelling gap that accompanies them is translating directly into pricing volatility and protection failures. 

This article examines what the 2025 loss data means in practice for insurers navigating a landscape in which the old assumptions are falling away.

Record insured losses continue

Global economic losses from natural disasters reached $260bn in 2025 – the lowest since 2015 – yet insured losses remained elevated at $127bn, marking the sixth consecutive year that insurance payouts exceeded the $100bn threshold.

In 2025 alone, it estimated that severe convective storms generated $61bn in insured losses globally, making it the third-highest annual total on record for this peril. This has been driven largely by repeated, damaging outbreaks across the United States.

Secondary perils overtake primary perils

Analysis shows that on a cumulative basis since 2000, secondary perils – including hailstorms, wildfires, flash floods, severe convective storms, and winter storms (outside Europe) have generated industry insured losses of at least $1.56tn, while primary perils which traditional catastrophe models focus on, such as tropical cyclones, earthquakes, and European windstorms generated roughly $1.04tn.

While these secondary events may individually be smaller in scale, their cumulative financial impact is substantial. The Los Angeles wildfires alone generated record-breaking insured losses of $40bn, and severe wildfire seasons across mainland Europe in 2025 underline that this is not an isolated trend but a structural shift in the risk landscape.

Pricing challenges and the protection gap 

Secondary perils present a distinct pricing challenge. The catastrophe modelling technology used to assess these events is less mature than for primary perils, introducing greater uncertainty into the underwriting process. The result is pricing volatility that makes it harder for businesses to budget for insurance costs and harder for insurers to write the risk profitably.

When claims occur, there is a growing trend of an increasing protection gap, as policyholders are still consistently uninsured and / or where there is limited cover for specific perils in higher risk locations. Insurers covered nearly half of global economic losses in 2025, but this left a protection gap of 51% - the lowest on record and leaving communities and businesses exposed to significant financial pressure. In a quickly changing environmental landscape, it is hard for insurers and policyholders alike to keep up.

Key takeaways for insurers

• Reinsurance structures may need rebalancing: If secondary perils are now the primary driver of cumulative insured losses, reinsurance structures designed around peak zone tropical cyclone and earthquake exposure may leave insurers with insufficient protection where losses are actually occurring.

• Accumulation assumptions require stress-testing: Secondary perils aggregate differently; dispersed geographically and correlated across lines. Insurers should pressure-test their accumulation assumptions against secondary peril scenarios rather than relying on primary peril aggregation methodology alone.

• Pricing volatility is a retention risk: Unpredictable premium movements in high-risk locations can drive policyholders to reduce or drop cover, widening the protection gap further.

• Claims preparedness must account for secondary peril characteristics: High-frequency, geographically dispersed losses from wildfires and convective storms demand different capacity and supply chain arrangements than peak zone catastrophe events.

• The protection gap is a regulatory conversation waiting to happen: Insurers should expect increased scrutiny of coverage adequacy and exclusion practices in high-risk locations, and are better placed engaging proactively than reactively.