Severe convective storms emerge as costliest insured peril of the century, Aon says

Severe convective storms (SCS) have overtaken tropical cyclones to become the costliest insured peril of the 21st century, according to Aon’s Climate and Catastrophe Insight report.

The paper said that on a cumulative basis, SCS has now generated approximately $794bn in insured losses for the industry since 2000.

It said this shift reflects “a relatively benign Atlantic Hurricane season with no U.S. hurricane landfalls and the continuing trend of gradually increasing SCS losses”.

The broker estimated global economic losses from natural disasters reached $260bn in 2025, which it described as “23% below the 21st-century average and the lowest since 2015”.

Despite lower overall hazard activity, insured losses remained elevated at $127bn.

The re/insurance broker said insured losses were “27% above the 21st-century average” and marked “the sixth consecutive year that insurance payouts exceeded $100bn”.

Aon suggested the contrast between subdued activity and elevated insured losses highlights the growing role of loss concentration.

The report said: “Even in a below-average hazard year, the concentration and severity of certain events can reshape the global loss picture”.

SCS represented the dominant driver of insured losses during the year.

“Severe convective storms alone accounted for $61bn in insured losses, the third-highest on record,” Aon said.

Insured losses from SCS were “nearly twice as high as their long-term annual average and lead the peril breakdown for the third consecutive year”, the broker added.

Wildfire was the only other peril to exceed its long-term average in 2025, Aon observed.

The report said: “SCS and wildfire were the only perils that exceeded their long-term loss averages in 2025”.

California wildfires represented the costliest single loss event of the year.

Aon said: “The Palisades and Eaton Fires [taken together] were the most expensive events, causing $58bn in economic losses and $41bn insured”.

It added: “Together, they resulted in losses of approximately $41bn, making them the costliest wildfires in US and world history”.

The report said 2025 ranked among the industry’s ten costliest years despite the absence of US hurricane landfalls.

“Despite the lack of US hurricane landfalls, 2025 ranked among the industry’s 10 costliest years,” Aon said.

The year also illustrated how secondary perils are collectively reshaping the loss landscape, the broker stressed.

“Secondary perils generated the highest insured losses on record and extended their lead over primary perils in 2025,” said the report.

On a cumulative basis, secondary perils generated at least $1.56trn in insured losses since 2000.

Aon said this compares with roughly $1.04trn generated by tropical cyclones, earthquakes and European windstorms combined.

The protection gap narrowed to its lowest level on record during the year.

The report said: “The global protection gap narrowed to 51%, its lowest on record”.

However, it warned that this improvement was driven by loss concentration in highly insured markets.

“This improvement was largely due to the concentration of losses in the United States, which accounted for 81% of global insured losses thanks to high insurance penetration,” Aon said.

The firm added that more than half of economic losses worldwide remained uninsured.

The report said: “Even so, more than half of economic losses worldwide remained uncovered, underscoring the persistent challenge of closing the gap in emerging markets”.

The accumulation effect of frequent medium-sized catastrophes was also highlighted.

Aon said: “Thirty billion-dollar insured loss events far exceeded the historical average of 17”.

This trend underscores “the accumulation effect of increasingly frequent, medium-sized catastrophes”.

Greg Case, Aon’s president and CEO, said the findings highlight the need for closer collaboration across the risk ecosystem.

“This year’s report highlights the growing need for collaboration among organizations, insurers, governments and communities,” he said.

“The insurance industry is well-positioned to act as a strategic partner to help navigate these challenges,” Case added.

The report noted that alternative risk transfer plays a growing role in closing protection gaps.

“Alternative risk transfer is increasingly critical for providing the capital needed to help organizations mitigate risk and strengthen resilience,” Aon said.

The broker also highlighted the role of parametric solutions in accelerating recovery.

“Parametric insurance products proved critical during events such as Hurricane Melissa, enabling rapid recovery for affected communities,” Aon said.

“Jamaica secured more than $650m in liquidity within two months of landfall as a result of catastrophe bond protection with a parametric trigger,”  the report continued.

Michal Lorinc, head of Aon’s catastrophe insight and author of the report, said resilience must now be approached holistically.

“Resilience today must be both physical and financial,” he said.

“As climate events continue to affect people and property, the opportunity lies in using data to strengthen preparedness, rethink risk management strategies and build partnerships that support faster recovery and long-term resilience,” Lorinc added.