Insurance in a Changing World: Five top takeaways

The insurance industry is not usually the first that comes to mind when thinking about how to defend ourselves against climatic disaster.  

But it was clear that the leaders in the room for our “Insurance in a Changing World” summit on 16 April believed that few industries are better positioned to influence how societies prepare for and adapt to emerging risks than this one. Insurance can incentivise homeowners to remove combustible materials and reduce wildfire exposure, require developers to adopt safer building practices, and channel investment into renewable energy. In some cases, it can even support the restoration of natural systems that act as buffers against extreme events. Seen in this light, insurance is not simply a financial safety net but a powerful tool for prevention and resilience. 

Among the ideas floated during the day were bold proposals such as making cyber insurance mandatory, especially for small businesses.  Nick Stace, Chief Global Impact Officer at Howden, pointed out that 600,000 businesses in the UK were victims of cybercrime last year. Headlines only covered big companies like M&S and Land Rover, but among the victims were mostly small businesses that did not have cyber insurance. Six months after the attacks, sixty percent of the companies that did not have insurance had declared bankruptcy. These closures have had ripple effects on employment and high streets across the country.

The reliability and scalability of data was another talking point throughout the day. Alexa Bruce, CEO at Tova, spoke about how water-related risks, especially drought, are massively underinsured due to poor data and inadequate modelling. Existing approaches rely on global models which lack accuracy, or local studies that are expensive to conduct. To address this problem Tova is developing a physics-informed AI model that simulates global water systems that captures both natural flows and human usage to predict how much water will be available in specific places. This makes it easier for insurers to understand water risk, thereby opening the door to better insurance coverage for those most vulnerable to droughts and flooding.

Here are five big takeaways you should know from the convening…

1. Closing the “Insurance Gap” is a win-win for everyone

“The climate crisis isn’t just a crisis in one part of the world; it affects all of us,” said Rachel Delhaise, Chief Sustainability Officer at Convex Solutions, “The more insurance steps up, the more it can bring economic stability and expand resilience beyond areas of the world where it is now,”

The “insurance gap” refers to the difference between total economic losses and the portion that is actually insured. Historically, this gap has been most pronounced in emerging markets, where access to insurance products has been limited. The good news is that progress is being made. In the 1980s, only 15 percent of insurable assets in these markets were covered. Today, that figure has risen to 40 percent. Delhaise emphasized that closing this gap is not an act of charity but a strategic imperative. “We are a global company, and we need to make sure we have assets to insure in the future. If we are not investing now, to be sure our capital is contributing to projects where climate risks are taken into consideration, there will be no assets to insure in the future,” she said.

Closing the insurance gap will create an economic ripple effect that expands stability beyond a single loss.  When farmers have access to insurance, they can recover more quickly from droughts or floods. This stabilizes food supplies, supports rural education by keeping children in school, and strengthens local economies. In turn, economic resilience contributes to political stability.

2. Name heat waves like we name hurricanes

During a panel titled “Can Insurance Keep its Cool in a 50°C world?”, Kathy Baughman McLeod, founder and CEO of HERA, suggested a simple measure to help build resilience against the worst effects of extreme heat: name heat waves in the same way hurricanes are named. June 2025 was the warmest on record in Western Europe with severe consequences for health and the economy. Crops were damaged, schools were closed, and by the end of the summer, losses were estimated at £43 billion. The human toll was equally alarming, with an excess of 16,000 deaths across the region, most of them among people over the age of 65.

Unlike hurricanes, heat waves often lack clear communication signals that convey their severity. Yet there are practical steps individuals and institutions can take to reduce risk, such as staying hydrated, limiting outdoor activity during peak heat hours, and adapting workplace policies. The challenge lies in ensuring that people take these warnings seriously.

Naming heat waves could help bridge this gap. By assigning names and categories, governments and emergency services can communicate risk more effectively and prompt timely action. Instead of vague forecasts about “elevated temperatures,” a named heat event signals urgency and encourages preparedness.

Seville in Spain has already begun experimenting with this approach. The city categorizes heat waves into five levels, ranging from “no risk” to “very high risk,” and assigns them names. The first such event, named “Zoe” in 2022, marked a shift toward treating extreme heat with the same level of attention as other natural disasters. As climate change intensifies, such innovations in communication could prove critical in saving lives and reducing losses.

3. Extreme heat will require new types of insurance

As temperatures rise, extreme heat is emerging as a major risk factor with wide-ranging impacts on health and productivity. Adrita Bhattacharya-Craven, Director of Research for Population Health Trends at the Geneva Association, highlighted the disproportionate effects on vulnerable populations. People over the age of 80 are seven times more likely to experience heat-related mortality than younger groups, and this demographic is expected to grow as populations age.

The economic consequences are also significant. Heat exposure leads to billions in lost productivity as workers struggle to perform in extreme conditions or are forced to stop work altogether. Traditional insurance models are not well equipped to address these kinds of risks, which are cumulative and often underreported.

HERA’s Kathy Baughman McLeod stressed that insurance alone cannot solve the problem. Risk reduction must go hand in hand with risk transfer. This includes investing in evidence-based solutions such as green roofs, cool roofs, improved airflow in buildings, and nature-based interventions that lower ambient temperatures.

She also shared an example of an innovative insurance product designed to address the realities of extreme heat. In late May 2024, temperatures in Ahmedabad, Pakistan approached 50 degrees. A woman carrying goods fainted from the heat and required hospital treatment. Under normal circumstances, she would have faced not only medical expenses but also the loss of income from the goods she could no longer sell. However, because she was insured against economic losses caused by extreme heat, she was able to recover and protect her livelihood.

This example illustrates how insurance can evolve to meet emerging risks. By designing products that reflect the lived experiences of those most affected, the industry can provide meaningful support in a warming world.

4. The time for insurance companies to go into Ukraine is now

Reconstruction efforts in Ukraine highlight another critical role for insurance of enabling investment in high-risk environments. Traditionally, insurers wait until conflicts have ended and peace agreements are signed before entering a market. Nick Stace, Chief Global Impact Officer at Howden, argued that the time to act is now. Having recently returned from Ukraine, he pointed out that the estimated £500 billion needed for reconstruction is effectively on hold due to a lack of insurance coverage. “For one pound of that money to flow in, the capital and the people behind it, need confidence of insurance,” said Stace.

Insurance acts as a foundation for investment by providing the confidence needed for capital to move. Without it, even the most well-intentioned funding commitments remain unrealized. Stace also highlighted the economic potential of Ukraine, suggesting that it could become the fastest-growing economy in Europe once reconstruction begins in earnest.

The stakes extend beyond Ukraine’s borders. The country is often referred to as the breadbasket of Europe and ranks among the top three wheat exporters globally. Restoring its agricultural capacity is therefore not just a domestic priority but a global one, with implications for food security and market stability. By stepping in earlier, insurers can play a pivotal role in accelerating recovery, unlocking investment, and supporting economic resilience on a broader scale.

5. Nature is our best line of defence against climate change

In the UK alone, six million homes are currently at risk of flooding, a figure expected to rise to eight million by 2050. Insuring these homes is essential, but it is not sufficient if entire communities remain exposed to repeated flooding. The challenge for insurers is not only to cover losses, but to reduce the risks that cause them.

Speaking on the keynote panel, Claudine Blamey, Chief Sustainability Officer at Aviva, outlined this perspective. “The product is nature to help mitigate risk,” she explained, “and that could be flood risk, drought, that could be cleaning the water. What you also need is a customer to be able to buy the product.”

In this model, the “customer” is typically the infrastructure organisation or those most exposed to risk, such as water companies, property developers, or local authorities. “Once you’ve got that product and you’ve got the customer, you’ve got a market and then you can start to bring in investment and capital into that space.” Creating this market is the critical step that enables capital to flow into nature-based solutions at scale.

These investments deliver multiple benefits. They reduce the likelihood and severity of losses, protect biodiversity, and create new opportunities for insurers to engage with sustainability as an asset class. Crucially, they shift the industry from a reactive model focused on payouts to a proactive approach centred on prevention. Will Butler, CEO of GaiaSicura, emphasized the importance of accelerating this shift through investment in nature-based solutions. These approaches harness natural processes to mitigate risk, for example restoring wetlands to absorb excess water, reforesting land to stabilise soil, and introducing urban green infrastructure to reduce runoff.

Efforts to build a functioning market are already underway. One notable initiative is the FloodAction Coalition, led by The Conduit, which brings together 70 partners to develop a £1 billion national market for water resilience. By aligning public and private stakeholders, the coalition aims to scale investment in solutions that address the root causes of flooding rather than just its consequences.

As climate risks intensify, integrating nature into insurance strategies will become increasingly important. It offers a more holistic approach to risk management, one that strengthens resilience, reduces losses, and delivers long-term value for both insurers and the communities they serve.