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The impact of climate change on insurance availability

Wind turbines in green field against blue sky in summer in Germany
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I recently wrote about how more frequent and intense extreme weather events are leading to insurance deserts – geographical areas in which the risks are reaching a point where it may become prohibitively expensive to secure insurance coverage, if coverage is available at all.

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Now let's try to understand better the scope of the threat – and how we may be able to build resilience to account for it.

Through August 2025, natural disasters had reportedly cost $162 billion on average, more than double average for this century. 

The lagging impact of fire-related health decline following the Maui and LA fires also suggests that hundreds of additional lives have been lost due to events well after they have occurred. 

A recent scenario analysis from the Economist and SAS examined several possible futures and the events that could lead up to each. Though the report aimed to forecast out to 2040, several of its themes are already becoming reality. 

  • The U.S. and China implement restrictive policies on cybersecurity, intellectual property (IP) and trade.
  • Limited access to technology worsening the digital divide and economic disparities.
  • The insurance industry is becoming regionalized, thus widening the global protection gap.

This exact fact pattern is playing out before our very eyes and creating a fragmented landscape in which only the affluent are able to afford insurance and there are insurance deserts across the globe. 

Technology's dual threat

At the beginning of 2025, I spoke at the Geospatial Risk Summit in New York alongside a panel of experts on technical, legal and ethical risks. The debate on technology's use and the risks it creates is an old and familiar discussion. Another speaker suggested insurers could use real-time satellite imagery and AI to cherry-pick the risks they wanted to insure (or not). 

I share this anecdote as, in fact, a positive story, because the collective audience immediately began raising their hands and offering their comments on this idea. One person from NASA clearly stated that the suggestion, and the foundational understanding of how their satellite data was being used, was wholly incorrect. An insurer then offered that such an application presents serious implications in their role in exacerbating the insurance desert situation. 

Now you weren't there, and you don't have to believe me. But I'd remind the reader that our industry has struggled with adverse risk selection since the early days. Better, faster, more accurate information represents a competitive advantage in the marketplace, so you can see how the speaker might reach such a conclusion about how insurers might use technology to their advantage. 

Technology can act as an early warning system, a predictive tool to get ahead of deteriorating situations. We've seen the power of IoT and AI harnessed to predict flood events, such as in Jakarta.  

Researchers are attempting to resurrect a NOAA climate database to aid in modeling work. It's noted for exploring economic attribution, for measuring climate change-driven specific loss as a potential outcome of the work. 

These tools are no longer reserved for the technologically elite. Every year, SAS sponsors a Hackathon. Here are several recent successes: 

Imagine what a consortium of insurers, state and local governments, community leaders and technology providers could do working together. 
Tomorrow, a chance of clear skies

So what do we do? That question represents a complex set of conditions I don't believe any one person or body has the resources or intellectual horsepower to answer. 

But I will say: Whatever we do, we'll have to do it together. And amazingly enough, we have examples of people working to do just that. 

We need insurers at the table, but they cannot do it alone. They have the expertise, the capital and the delivery mechanism for insurance, but regulators and technology providers need to be a part of the conversation as well.

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Climate change Natural disasters Insurtech Law and regulation
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