Natural catastrophe (nat cat) insurance claims have surged over the past several years, a trend driven by climate change, increasing urbanization, and asset exposure. From 2020 to 2023, insured losses have exceeded $100 billion annually—a first in the industry’s history, highlighting the growing financial impact of extreme weather events. 2024 looks to continue this trend, with losses from hurricanes Milton and Helene poised to push insured damages beyond the $100 billion mark once again.
This troubling pattern is driven by both the frequency and severity of weather-related catastrophes. While hurricanes have long been a staple of nat cat claims, other events such as floods, wildfires, and severe convective storms (SCS) are now contributing significantly to the total losses. These secondary perils, once considered lower-impact, are becoming more destructive, adding to the overall burden on insurers and organizations alike.
2024: Another Year of Heavy Losses
Hurricane Milton alone could lead to over $50 billion in insured losses [image credit: NASA]
While 2023 was the first year where global insured losses topped $100 billion without a singular event causing more than $10 billion for the industry, 2024 has served as a reminder of the devastation that these singular events can cause.
Hurricane Helene, which made landfall in Florida as a Category 4 storm, is estimated to have caused between $8 billion and $14 billion in insured damages. Milton, which hit less than two weeks later, is projected to add significantly to the toll, potentially causing an additional $50 billion in insured losses. With severe thunderstorms and flooding already causing significant losses in the first half of the year, this reinforces the expectation that 2024 will mark the fifth consecutive year where insured losses exceed $100 billion.
The escalation in claims underscores the vulnerability of businesses and infrastructure, as well as the importance of climate resilience. This is just as true for businesses with operations outside of hurricane-affected areas. Many industries—particularly those with global supply chains, complex operations, and extensive infrastructure—are facing unprecedented challenges in the wake of climate-induced disasters.
Climate Change as a Catalyst for Rising Nat Cat Claims
The sustained rise in nat cat claims is a stark reminder that climate change is not a future risk—it is here now, reshaping industries and the economy.
As global temperatures rise, so too does the intensity of storms, floods, and wildfires. Hurricanes are becoming stronger and more frequent, while wildfires are burning hotter and spreading faster across larger areas. Sea levels are rising, which amplifies the risk of coastal flooding during storms, while droughts are also increasing, impacting agriculture and making regions more susceptible to fires. Increased levels of rainfall are leading to severe flooding, with 2023 seeing billions in insured losses driven by unprecedented rainfall in parts of the U.S. and Europe.
Moreover, the unpredictability of these events—exacerbated by shifting climate patterns—makes it harder for businesses and insurers to accurately assess risk. The traditional models used to forecast losses are increasingly inadequate, leading to larger-than-expected claims when disasters strike.
Understanding Nat Cat Claims
Hurricane Helene caused widespread devastation after making landfall as a Category 4 hurricane [image credit: Florida Fish and Wildlife]
Nat cat claims have grown in complexity and frequency as businesses increasingly face the financial impacts of climate-driven disasters. Hurricanes, wildfires, floods, and other severe weather events not only cause physical damage to property but also disrupt operations, leading to significant business interruption losses. Managing these claims requires a strategic, well-documented approach from the onset of the disaster.
As outlined by experts from Sigma7 Forensic Accounting, one of the first steps in preparing a successful claim is to immediately document all loss-related expenses and impacts. Setting up a robust system to track property damage, cleanup efforts, and business interruption costs is crucial. This process should include gathering invoices, payroll records, and other documentation to ensure that the claim is well-supported and aligns with the specific terms of the insurance policy.
In many cases, organizations turn to forensic accountants to help quantify losses accurately. These experts work to ensure that not only direct physical damages are accounted for but also indirect losses like revenue disruption and increased operating costs. By providing thorough documentation and leveraging professional expertise, businesses can accelerate settlements and maximize their insurance recovery.
For a more detailed insight into what to expect during the claim process, download our free CAT claim guide here.
Serving as a playbook that can be shared and reviewed internally to prepare for a loss event and when you are facing one, it contains all of the documentation and steps you need to have a successful outcome.
Preparing for the New Normal
As nat cat losses continue to rise, businesses must shift their focus from reactive responses to proactive resilience. The foundation of this strategy lies in integrating risk management practices across the organization, from risk engineering to forensic accounting, ensuring that every aspect of the business is prepared for—and capable of recovering from—future disasters.
Risk engineering site surveys are an obvious place to start. This might include identifying vulnerabilities within your facilities that could exacerbate the damage caused by natural disasters, implementing resilient infrastructure such as storm-water management systems, or reinforcing your existing measures to withstand them better. This in turn reduces your exposure to losses when a nat cat event occurs.
The impact of climate change on your organization goes beyond just the physical risk to your facilities, however. Leading organizations are now adopting advanced risk assessment techniques that account for the full spectrum of climate-related hazards. These assessments help businesses identify vulnerabilities, prioritize risks, and implement targeted measures to mitigate the impacts of extreme weather events.
This goes beyond traditional site surveys. Instead, it incorporates elements such as business continuity planning, natural hazard mapping, and utility supply reliability to comprehensively address the full range of climate change hazards that can impact industries and their supply chains.
By integrating this proactive approach with dedicated crisis management strategies, training programs that prepare personnel for emergency responses, and forensic accounting services to quantify losses and assist with recovery, businesses can better navigate the complexities of natural catastrophe claims and strengthen their overall resilience.
Sigma7 Risk Engineering has pioneered industry-leading Climate Change Risk Assessments and Audits as part of this broader strategy.
Click here to learn more about our advanced approach to climate change risk
The rise of natural catastrophe claims is not just an insurance problem—it’s a business problem. With the 2024 hurricane season set to push insured losses beyond $100 billion for a fifth consecutive year, organizations must prioritize resilience and risk mitigation strategies.
A resilient business is one that not only responds effectively to crises but also anticipates future threats, adapting its operations and infrastructure accordingly.
To learn more about how Sigma7 is assisting some of the world’s leading organizations prepare for and mitigate the impact of climate change on their operations, get in touch with us today.