A reduction in global insured losses from natural catastrophes in 2025 should not be read as a sign that the risks have diminished. This is the warning from Willis, whose latest Natural Catastrophe Review shows that losses from nat cats in 2025 totalled around £74bn – roughly £30bn lower than in 2024.

The broker argues that the absence of a hurricane making landfall in the US last year reflects short-term variability rather than a meaningful reduction in risk, and cautions that catastrophe exposures remain high.

Published today, the firm’s latest report outlines the emergence of wildfire as a core contributor to insurance volatility.

The report's authors argue that relying solely on historical losses will underprice risk, calling for models to be updated with current conditions, more detailed asset information, and realistic replacement cost assumptions. Prolonged drought and expanding wildland urban interface zones have made catastrophic fires more likely, the firm argues, pointing to the 2025 Eaton and Palisades fires as examples of how the risk now manifests.

Willis also stresses the need to factor in compound perils, where damage from rapid sequences of events can increase losses and complicate claims. It says disaster risk financing instruments can help reduce economic impact when multiple catastrophes hit in quick succession, drawing on experience from Super Typhoon Ragasa in the Philippines.

Although no US hurricanes struck land in 2025, the review points to changing behaviour in the North Atlantic. A warmer ocean has extended conditions favourable to storm formation later into the season and may be driving more Category 5 storms. Hurricane Melissa in Jamaica is highlighted as an example of these evolving patterns.

Cameron Rye, director of natural catastrophe analytics at Willis Re said that good luck is “no substitute for sound strategy”.

“Even if 2025 can be described as a moderate loss year, catastrophe risk remains high, and physical risks continue to increase as the world warms. Insurers should act now to protect their portfolios against unsustainable accumulations of risk and prepare for a reversal of fortune,” he added. “The path forward given these trends isn’t to walk away from risk, but instead to encourage investment in resilience and mitigation. Risk managers and sustainability teams can protect business value by working together, supported by advances in modelling, pricing and risk awareness.”

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