In the third hottest year ever, damage decreases but the risk remains high

Cyclone Harry, which hit Sicily, Calabria and Sardinia in January 2026, has once again turned the spotlight on natural disasters. The changing climate presents the bill periodically and brings with it not only a trail of victims, but also huge economic damage only partly covered by insurance. The 2025 balance sheet contained in the Climate and Catastrophe Insight by Aon - a leading insurance and reinsurance brokerage and risk and human capital management consultancy - once again highlights the strong impact of these events. In the third hottest year ever losses from natural disasters amounted to $260 billion, down 29% from 2024, at the lowest since 2015 and below the century average. Insured losses remained high at USD 127bn, marking the sixth consecutive year with claims above USD 100bn. Insurers therefore covered almost half of the economic losses, leaving a protection gap of 51%, the lowest ever recorded. This is because most of the events, especially the most costly ones (about 81% of the total) occurred in the US where the percentage of insured on average is higher than in Europe and Asia, particularly for fires. The flip side of the coin is that about half of the losses remained uninsured, exposing millions of people to financial risk, especially in emerging countries.

"The report's data," emphasises Pietro Toffanello, CEO of Aon Reinsurance Italia, "confirm that the climate challenge is now structural, and the damage caused at the beginning of 2026 by Cyclone Harry in Southern Italy is also a signal for our country. The reduction of the protection gap at a global level 'is a positive sign, but at the same time highlights how crucial it is to continue strengthening physical and financial resilience, especially in the most exposed and least insured markets'. In this context, he adds, "the reinsurance industry plays a key role in supporting capacity, innovation and increasingly advanced risk transfer solutions. The integration of advanced models, quality data and risk analysis technologies enables insurers, companies and institutions to transform climate uncertainty into more informed, sustainable and long-term oriented decisions".

Last year hail storms were the most costly insured risk with losses of 61 billion, surpassing tropical cyclones. At the level of individual catastrophes the sad record, however, lies with the Palisades and Eaton forest fires in California, which together caused losses of 58 billion. Overall, in 2025 climate change caused the deaths of 42 thousand people: a number that is 45% lower than the average for the century, but which still speaks of a dramatic situation. Among them, 25 thousand lost their lives due to the extreme heat, while the Myanmar earthquake was the deadliest event of the year with over 5 thousand victims. Bringing the focus back to Italia "in 2025," Toffanello points out, "we witnessed a contained number of high impact events compared to the historical average. However, a significant portion of the economic losses remained uninsured, confirming that the protection gap in the country is still significant". Aon estimates direct economic losses from disasters at around EUR 1.5-2 billion due to weather events such as droughts and floods. To these must be added high indirect damages, such as lost agricultural production in the case of droughts. In our country, the protection gap is on average very high and equal to about 80%, but there are large gaps between North and South and the percentage varies considerably depending on the type of risk and the size of the companies: the range goes from 90% for micro-small companies to 30% for large ones. Moreover, the most fragile segments of the population and economic fabric are the least insured and therefore most exposed to this type of disaster.

"In a context of climate change and increasing volatility of extreme events," says Toffanello, "it is necessary to reinforce the preparedness of the system through a more evolved use of data and risk models. The initiatives launched by the government, including the introduction of compulsory natural catastrophe insurance cover for companies, go in this direction and represent an important step towards improving the resilience of the productive fabric of Italia. In parallel, the creation of the national reinsurance pool for catastrophe risks, developed with the support of the market and Ania, he says, 'is a key element in increasing capacity and stability in the long term. The adoption of increasingly sophisticated catastrophe models, high granularity data, exposure management technologies, and advanced climate risk analysis tools is critical to support insurers and companies in assessing risk, defining sustainable covers, and managing capital efficiently". Aon contributed to the design and management of the pool by providing technical expertise, modelling capabilities and access to global reinsurance markets, supporting a more robust and resilient system.