In a new policy brief focusing on advanced economies, WWF warns that climate change and nature loss are rapidly eroding the foundations of global insurance markets, driving up economic losses from extreme weather events and widening the “insurance protection gap” — the share of damages left uninsured. The resulting financial exposure threatens not only households and businesses but also public finance budgets and a stable economy.  

Insurance underpins modern economies by protecting assets, enabling investment, and supporting recovery after disasters. But worsening floods, droughts, wildfires, and storms, combined with the loss of natural defences such as forests and wetlands, are making insurance increasingly unaffordable or unavailable. 

According to the UN Office for Disaster Risk Reduction, global disaster costs now reach USD 2.3 trillion annually, including indirect and ecosystem losses. In the past year alone, the U.S. spent close to USD 1 trillion on climate-related costs, while the EU lost €43 billion from heatwaves, droughts, and floods. 

Across major economies, insurance markets are struggling to absorb these growing risks: 

• In the United States, insurance premiums for homeowners have risen 38% since 2019, with coverage becoming unprofitable in 18 states. 

• In Europe, only 20% of catastrophe losses are insured, and the protection gap continues to widen. 

• In Australia, one in six households now spends more than a month’s income on insurance premiums. 

• Overall, according to Swiss Re insured losses for so-called “natural catastrophes” (mostly driven by climate-related events) are increasing by 5–7% annually corrected for inflation. 

As insurers raise premiums, restrict coverage, or withdraw from high-risk regions, governments are being forced to step in as insurers of last resort - adding pressure to already limited public budgets. Germany’s €30 billion Ahrtal flood recovery and Spain’s €2.2. billion drought bail-out of farmers in 2023 illustrate how uninsured risks lead to fiscal liabilities. In the US, the government enacted $110 billion in disaster assistance in 2024 for relief efforts in states hit by hurricanes and tornadoes.   

“The exponentially growing losses and damages from extreme weather events that are undermining the insurance market, are caused both by increasing temperature and the destruction of ecosystems that are protecting us”, said Kirsten Schuijt, Director General of WWF International. “Forests, mangroves or wetlands are crucial for reducing the devastating impact of these extreme events and therefore need to be at heart of the strategies to increase our resilience and keep regions insurable.”  

Laurence Tubiana Special Envoy to Europe for COP30 states:  “The insurance protection gap leaves people vulnerable as extreme weather events hit people hard. With over half of climate-related losses uninsured globally - and more than 90% in developing countries – this is no longer just an insurance market issue, but a systemic threat to people’s livelihoods, economic resilience and even financial and fiscal stability.”  

Governments and financial regulators must address the root causes - climate change and nature loss - if our societies are to remain insurable.  

WWF urges policymakers and financial regulators to: 

1. Undertake a holistic and forward-looking risk and resilience assessment including direct and indirect losses to inform government action to guide fiscal and policy decisions. 

2. Cut greenhouse gas emissions and reverse nature loss to stabilize long-term risk and assure insurability 

3. Make nature a core element of resilience and adaptation strategies, recognizing the cost-effective, protective value it has. 

4. Strengthen regulatory and macroprudential oversight to align financial systems with long-term resilience frameworks  

5. Increase market incentives to contain the protection gap and promote preventive action. 

Nature-based solutions can deliver powerful and cost-efficient protection. In Switzerland, for example, the flood prevention value of forests is estimated at CHF 4 billion (USD 4.5 billion) annually —- and it is up to 25 times more cost-effective than alternatives such as built infrastructure.