On Aon Podcast: Building Climate Resilience: Insights from Aon’s 2025 Climate and Catastrophe Insight

On Aon Podcast: Building Climate Resilience: Insights from Aon’s 2025 Climate and Catastrophe Insight
February 18, 2026 13 mins

On Aon Podcast: Building Climate Resilience: Insights from Aon’s 2025 Climate and Catastrophe Insight

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Aon’s Tracy Hatlestad and Michal Lorinc discuss the findings of Aon’s 2025 Climate and Catastrophe Insight report. They explore another year of more than $100 billion in insured losses and what a changing climate means for people, infrastructure and the global economy.

Key Takeaways
  1. Climate risk is increasingly blurring lines between property and people risk, demanding more integrated decisions.
  2. Secondary perils, including severe convective storms and wildfires, are now major drivers of global insured catastrophe losses.
  3. Alternative risk transfer and parametric solutions complement traditional reinsurance to manage climate driven volatility.

Michal Lorinc:
"One under-average year is no reason for complacency, basically.
So organizations and people need to think about strengthening their resilience for the future."

Intro:
Hello and welcome to this, the latest episode of On Aon.
On Aon is Aon’s global podcast that explores the top issues affecting businesses around the world with each week dedicated to either a Risk Capital, Human Capital, Industry or Global topic.

  • Our Global Insight episodes will discuss what’s happening in the world of geopolitics, economics and regulation.
  • Risk Capital Insight is a deep dive — not only into the main risks organizations are facing — but also how they’re responding.
  • Human Capital Insight is all about the latest talent, health and wealth trends
  • And our Industry Insights will look at a different sector each episode and the risk and people issues they’re facing.

This week it’s our Risk Capital Insight, which explores the big takeaways from our Climate and Catastrophe Insight report for 2025. Talking about how organizations can improve their resilience in a changing climate are

  • Tracy Hatlestad, who’s executive managing director and global head of property for reinsurance here at Aon
  • And Michael Lorins, who leads the Catastrophe Insight team, a part of Aon’s Impact Forecasting
  • And joining them is Alexandra Lewis, Aon’s Chief Marketing Officer, Reinsurance.

Alexandra Lewis: (00:00)
Hello and welcome to On Aon and this month's Risk Capital episode. My name is Alexandra Lewis and I'm Chief Marketing Officer for Reinsurance Solutions at Aon. And today we're looking at the key findings of this year's Aon's Climate and Catastrophe Insight Report.

It's been 20 years since Aon published its first Insight Report and lots has changed in our world's and our industry's understanding of climate risk.

Our Climate and Catastrophe Insight, which is available to download at aon.com, tells two very important stories.

First, that weather, and particularly climate risk, can affect almost every aspect of an organization's operations.

The second, that to tackle rapidly changing climate risk, the insurance and reinsurance industries must continue to innovate.

With me today to discuss the Insight report and its findings for 2025 are Tracy Hatlestad, who's Executive Managing Director and Global Header Property for Reinsurance here at Aon, and Michal Lorinc, who is an analyst and leads the Catastrophe Insight team, a part of Aon’s Impact Forecasting and the author behind this report.

Welcome to both of you.

Tracy Hatlestad: (01:18)
Thanks Alex, great to be here.

Michal Lorinc: (01:19)
Hello and thanks for having me as well.

Alexandra Lewis: (01:22)
Fantastic. So let's start off the question for you both. So Tracy, let's kick off with you and what were the big standout findings for you from this year's report?

Tracy Hatlestad: (01:35)
Yeah, I think that's great question. I think if I step back and just think about how we typically see catastrophe losses on a year-on-year basis, we talk about primary and secondary perils. Often, I think 2025 is unique in the fact that we're achieving or unfortunately achieving the $100 billion insured loss number again this year, but very largely, predominantly through secondary perils.

Secondly, we also saw the lowest protection gap of the year, and that's predominantly as a result of the fact that 81% of those losses are coming from the United States, which we know has a higher insurance rate of protection than many other places around the world.

One of the standout facts to me this year as well is the fact that severe convective storm has driven $61 billion and nearly half the loss that we saw this year — a trend that's been developing in recent years, but it's just further highlighted by the fact that secondary perils are driving the losses.

And then of course, you have the wildfires that happened in January starting off 2025 with an unfortunate $41 billion of insured loss. As I think about the context of those losses, the wildfire in particular is interesting because it was predominantly covered by some of the largest insurance companies in the United States that had significant retentions.

And what that meant is that ceded losses while still substantial to reinsurers were muted to some extent compared to what we would often see for a loss of that magnitude in Florida hurricane standards, for example. In addition, the resets that we saw in 2023 for retentions for insurance companies means that 2025 again is likely going to look like a really good financial year for the reinsurance market.

So it's three really solid years of performance, which really shifts the market to a buyer’s space.

Those are key standout trends and how they apply to the industry from my perspective at this point.

Alexandra Lewis: (03:29)
Yeah, that's absolutely fascinating. Thank you very much for that extra context there, Tracy. And Michal, you obviously led the research with your team and did a fantastic job of bringing these insights together. What really stood out for you?

Michal Lorinc: (03:44)
I think each year is unique in its own way. And 2025 was perceived by many people, I think, as under average, or people thought that not much was happening during the year.

Yet I think there were many significant and memorable events with lots of concentrated impacts on a small area. Imagine, for example, Hurricane Melissa or the earthquake in Myanmar, for example.

So there weren't any huge industry-changing events like we've seen in some past years, but on cumulative basis, we, as Tracy said, exceeded $100 billion in insured losses again.

Apart from some of those statistics that Tracy already mentioned, SCS, yes, it was the costliest peril in terms of economic and also insured losses. I would also mention another interesting fact that on a cumulative basis since 2000, SCS is now the costliest peril overall because it has overtaken the tropical cyclone, which has been the costliest so far.

And this is mainly because there were no US hurricane landfalls in 2025.

And another interesting statistic was the protection gap. So, this was the lowest on record according to our data. But again, it's mostly circumstantial because most of the big events occurred in the United States, which is relatively well-covered compared to other countries.

When you look at the historical data, there is some trend of closing the protection gap. But I believe this is more related to the change of composition of those perils and how much loss is coming from SCS and other secondary perils.

But we've also seen examples from different parts of the world where they apply different strategies to strengthen the financial resilience and be able to cover more of the economic losses.

The protection gap was the lowest on record, but we still need to remember that half of the losses still went uninsured globally. So, there's still a lot of work to do, I think, on that front.

Alexandra Lewis: (05:49)
Definitely. So you mentioned the record around the protection gap and another record was of course around the temperature and the fact that it was the hottest year on record. How does extreme heat impact organizations?

Michal Lorinc: (06:05)
So the heat is a peril that is profoundly impacted by climate change. There's lots of evidence on that. And when you think heatwaves, one of the primary impacts is on human health. We could see the impacts of heatwaves around the world in 2025 as well. We listed approximately 42,000 fatalities from heat in 2025 alone, which is a staggering number. Most of it came from Europe from the heatwaves in summer.

But heatwaves and these climate-affected perils are not only affecting human health, they have far reaching impacts in different sectors of the economy. So, one needs to think about this peril holistically and think about all the secondary impacts which heat wave have in energy or infrastructure or other aspects of the business.

One of the aspects of heatwave impacts, which is discussed more and more is the impact on energy supply chains, for example, and how it affects new industries such as data centers being constructed and how they affect the energy demand and supply in during heat waves and during summer seasons.

It also affects stuff like in some countries you are legislatively obliged to basically think about your workforce during heatwaves and be able to help them overcome those impacts. For example, you might need to interrupt your business during some heatwaves and that also comes to the insurance. So, there are different aspects that you need to think about when it comes to this peril.

Alexandra Lewis: (07:40)
Definitely, I think it's really interesting how you talk about the risk and the people issues, but how they're becoming increasingly entwined. So it's really important information for risk managers right through to chief people officers alike. Tracy, I was also keen to come back to your point earlier on around alternative risk transfer, particularly if we think around how Jamaica has benefited from a parametric solution that Aon helped to place.

Can you just give us bit more background into that please and what does this actually show and highlight going forward?

Tracy Hatlestad: (08:20)
Yeah, thanks Alex. Aon was able to help facilitate a Cat Bond transaction for the government of Jamaica that was triggered this year with the advent of Hurricane Melissa. It provided $150 million in coverage to the Jamaican market, which is fantastic contribution in a really dire time for that country.

We've seen continued transactions like that happening around the world. And in fact, the Cat Bond space by the end of 2025 will have total bonds outstanding of circa $60 billion.

And as we look at the market as a whole, the industry places north of $500 billion in property catastrophe, reinsurance transactions. So it makes up about 10% of that total placement.

Just thinking about alternative risk transfer from a broader perspective as well, parametric covers are increasing the prevalence in the industry.

We see them more in the commercial risk side, but we've also seen them come into trades in some of the retro space as an alternative to ILW covers. And then secondly, structured reinsurance remains attractive to insurers and reinsurers as well. It's a great alternative to look for frequency cover, for an example, which with Michal a talking about here, severe convective storm and the frequency and contribution that it has had in particular to global cat losses makes that really an attractive reinsurance product alternative to traditional reinsurance as we kind of coin it in the market.

And then the industry is getting a lot better at evaluating the trade-offs. Each of those different products come with traditional U&L cover versus some basis risk cover, different durations, et cetera.

And the ease with which Aon is able to consult with clients and determine the right product has only improved since the had a significant increase that all of those products have been playing in the market over the last decade or so.

Alexandra Lewis: (10:12)
Brilliant. Thank you for the background on that. I think it's incredibly encouraging how the industry is constantly evolving to bring new solutions and find ways of managing and navigating the volatility. So Tracy and Michal, thank you very much for your insights today. Just as we wrap up, what's one key piece of advice from the report that you would give to those listening? And let's start with Michal.

Michal Lorinc: (10:39)
Thanks, Alex. That's a good question. I would say one of the messages in the report, repeated, that one under-average year doesn't mean that there is a reversal of the trend that we've seen over the past several years and that is increasing losses.

One under-average year is no reason for complacency, basically.

So organizations and people need to think about strengthening the resilience for the future years because it's not getting very better in the next few years, the increase in losses, which is primarily caused by increasing exposure to those risks, is going to continue.

And I think in this age, I think we can use all the available data and solutions that we have at our disposal to bring this to life. And Aon provides such tools in different sectors using advanced analytics and using various datasets, including the new ones, such as those brought to life by stuff like artificial intelligence.

So we're already using, for example, weather forecasts for artificial intelligence models, for example, and that's increasingly used in different sectors, including insurance and reinsurance.

So yeah, I think the piece of advice would be to follow the trends and use all the available data and we at Aon can help to formulate it into advice and better decisions ultimately.

Alexandra Lewis: (12:02)
Brilliant. Yes, a strong message to take action now. And Tracy, how about you,

Tracy Hatlestad: (12:08)
Yeah, I just echo a little bit of what Michal is saying around the data that we provide in this report we're able to gather over the years that he and the team have been pulling information together is substantial and we want our clients to be able to use the data to help inform decisions beyond just what they can ascertain from their own data and information.

It's a really powerful tool to use for them.

And then secondly, I would just say that global reinsurance capital at the moment is at a high and while reinsurance returns still look pretty good in the property catastrophe space. If we think about it from a reinsurance perspective, it's a great time to look at alternative products, as well as traditional reinsurance to find good balance for risk transfer solutions for future cat losses.

Alexandra Lewis: (12:54)
Brilliant. Thank you very much. So that's our show for today. Thank you very much for listening. We'll be back in the coming weeks to discuss more risk capital topics, including trade credit, property and casualty, and data and analytics.

If you'd like to find out more about the Climate and Catastrophe Insight in the meantime, then please head to aon.com.

So, until next time, goodbye.

Outro:
Thanks for tuning into the latest episode of On Aon. If you enjoyed this episode, don’t forget to subscribe wherever you get your podcasts and be sure to visit Aon.com to learn more about Aon.

We’ll be back next week with another episode — our Human Capital Insight — where we’ll be discussing the latest talent trends in three key industries — Life Sciences, Technology and Financial Services.

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