Climate-Risk Claims: The Hidden Costs of Extreme Weather
Severe weather isn’t just striking more often—it’s becoming financially unavoidable. In 2024 global economic losses from natural disasters surged to approximately US$320 billion, with around US$140 billion of that amount covered by insurance, making it one of the costliest years on record. Weather-related catastrophes — primarily floods, wildfires, severe storms — accounted for 93% of all losses and 97% of insured losses. (Munich Re) As floodplains expand and perils once considered “rare” become annual, the financial exposure for carriers, policyholders, and third-party administrators is rising sharply. At Edge Claims we view this not merely as a rising cost line, but as a structural shift in how we must design claims, pricing, and risk resilience.
Non-peak perils — frequent, smaller scale events like convective storms, flash floods, and wildfires — are driving much of the increase in loss activity. In 2024 such perils dominated insured loss growth, especially in regions with higher insurance penetration. The cumulative cost in many markets is now heavily influenced by these recurring events rather than by once-in-a-decade disasters. (Gallagher Re)
Critical assumptions in many underwriting, reserving, and modeling frameworks are being tested. Many models still assume statistical stationarity—that the past is a reliable guide to the future. Yet climate science, catastrophe modelling, and empirical loss data increasingly suggest that risk profiles are shifting; flood frequency, wildfire reach into suburban zones, storm intensity, and rainfall volatility are all escalating metrics. Pricing guidelines and reserve buffers that do not account for these shifts are likely to be undercapitalized. For claims administrators, this means more frequent need for specialized expertise, forward-looking scenario modelling, and flexibility in escalated loss oversight.
Though roughly 43% of total global losses from natural catastrophes in 2024 were insured, this leaves a protection gap of about 57%, or over US$180 billion in losses borne by governments, businesses, and individuals without insurance cover. (Swiss Re Sigma, WTW Natural Catastrophe Review). At Edge Claims, we see this protection gap not only as a moral and market challenge, but also an operational one: many “uninsured” loss claims affect infrastructure, business interruption, liability, or future exposures that become covered only when insurers or public entities are involved.
To manage these pressures, claims administration needs to evolve along three dimensions simultaneously: prediction, response, and communication. Predictive analytics must incorporate climate projection data, geospatial risk indicators, and non-linear loss escalation trends. Response protocols must allow rapid scale-up for events that are geographically dispersed yet individually small — such as multiple flood claims in suburban areas, or wildfire damage across corridors, which challenge field resources and adjuster availability. Communication must evolve too—claimants expect transparency about timeline, about coverage limits, and about how climate risk is being considered by insurers and administrators alike; ambiguity erodes trust and increases litigation risk.
Edge Claims is aligning its strategy to these evolving expectations. We are integrating climate risk factoring into our loss triage models, enhancing our catastrophe response protocols, and investing in tools that detect cumulative damage patterns early. We are also exploring parametric and alternative risk financing instruments for clients in high-exposure geographies, working with carriers to design coverages that balance affordability with meaningful protection. Central to our approach is the belief that resilience is built not only in policy terms, but in how claims are handled — swiftly, fairly, and with an anticipatory mindset.