Let’s be honest: climate disasters are hitting harder than ever. The wildfires in southern France, Spain, and California in 2025, devastating floods in northern Italy, Spain and Germany, and relentless heatwaves across Central Europe have sent insurance claims soaring. We are now at a critical juncture.
The figures are eye-opening. Claims have jumped by 40% in some places, and it’s not just the Mediterranean feeling the heat. According to Allianz’s latest Risk Barometer, climate risk remains the top concern for European insurers. These escalating losses and shifting risk patterns are forcing a fundamental rethink of traditional models.
I had a chance to sit down with Silvia Savini to discuss the impact of climate risks on insurance companies. Silvia is a global executive with 20+ years of leadership experience across insurance, banking, and investment platforms, with deep expertise in corporate innovation, digital ventures, resilience, and sustainable capital strategy. At Aon, she co-created and operationalised Aon Climate, a corporate venture focused on resilience and innovation at scale, leveraging insurance as a catalyst for systems change in resolving the insurance gap, climate adaptation and transition. For Silvia, insurers are not just responders to climate disasters; they are key players in driving forward adaptation, innovation, and long-term resilience.
Iforii: Silvia, what climate-related risks are currently the most urgent for insurers?
Insurers now face climate-related risks on two critical fronts. On the underwriting side, the increasing frequency and severity of extreme weather events like wildfires, floods, and storms are driving up claims and making it harder to rely on traditional risk models. Meanwhile, on the investment side, portfolios are exposed to transition risks as net-zero policies and changing regulations threaten to strand fossil fuel assets and disrupt financial markets.
Uncertainty around regulation, gaps in reliable data, and the unpredictable economic fallout from climate change add further complexity to both underwriting and investment strategies. To stay resilient, insurers must rapidly adapt to these dual threats or risk leaving their balance sheets and clients exposed.
Silvia Savini, Principal & Founder Sunstone Impact Advisory
Iforii: How has climate risk evolved in recent years, and what does that mean for insurers today?
With climate risk and its impact intensifying, insurers face mounting challenges across three critical fronts:
- Physical risk: A few years back, we saw extreme weather as rare, insurable events. But after COP28 in Dubai and the updated NGFS scenarios, it’s clear: these disasters are the new normal. The 2025 Iberian blackout is a case in point-millions in Spain and Portugal lost power during a heatwave due to fragile grids and underinvestment, not just bad luck. Misinformation muddied the waters, but the real lesson was about systemic risk. For insurers, the main issue wasn’t the size of payouts, but the flood of claims-everything from electrical damage at home to spoiled goods in shops and business interruptions. Handling so many claims at once strained insurers’ systems and, if they didn’t act fast, risked damaging their reputation or even facing lawsuits. The event also raised tough questions about whether insurance policies are keeping pace with new types of systemic risks.
- Then there’s liability risk. ClientEarth’s legal action against the energy giant Enea in Poland is a wake-up call. When the company and its insurers were taken to court over a failed coal project, the verdict was clear: ignoring climate risk can cost shareholders dearly-here, €1 billion. Insurers can’t afford to overlook climate due diligence anymore.
- Transition risk is just as pressing. As Europe accelerates toward net-zero, assets like coal plants are quickly losing value. Allianz’s decision to exit coal in 2025 sent a powerful signal: move your investments or be left holding stranded assets. Meanwhile, in California, wildfires led to $40B in losses, pushing the state’s FAIR Plan deep into deficit and causing insurers to hike premiums or withdraw from high-risk areas.
Iforii: How can insurers contribute more effectively to managing and mitigating climate risk?
Insurance companies have a critical part to play in helping to mitigate climate risk. For this they need to work with better tools, of which we already see some good examples. AI and machine learning, like the collaboration between Munich Re and ClimateAi, are helping us predict floods in places such as northern Italy’s Po Valley or the Danube Delta. These advanced models use satellite data and climate projections to help insurers price risk more accurately.
Parametric insurance is another game-changer. Instead of waiting for adjusters, if certain weather thresholds are met, payouts are triggered automatically. This has sped up claims for SMEs in flood-prone regions of the Netherlands and Poland, and in Malaysia, it’s cut claim delays by more than threefold.
Public-private partnerships are crucial too. When insurers withdraw from high-risk zones like parts of southern France, collaborations like the EU’s Climate Resilience Fund – with AXA and Zurich – step in to support insurance solutions, research, and resilience projects where they’re needed most. As EIOPA aptly puts it “The Climate Resilience Dialogue report identifies the need to actively explore the potential for new public-private collaborations schemes, at the EU or national level. EIOPA supports such partnerships as they can promote risk prevention and adaptation, reduce the cost of the risk transfer ex ante and incentivise the supply of and demand for insurance.”
Iforii: What are the biggest challenges holding insurers back from accelerating change?
Insurers are not adapting quickly enough. Data fragmentation and inconsistent regulations across Europe are major headaches – Oliver Wyman notes that 60% of insurers struggle here. And modelling complex events, like a wildfire followed by a cyberattack, is still a work in progress.
Iforii: Are innovation hubs making a real impact—and if so, how?
Absolutely, innovation hubs are having a significant impact.
A notable example is Singapore with their Climate Innovation Hub which is supported by Aon and the government. This center brings together insurers, technology firms, and academic researchers to jointly create advanced solutions for climate risk. One project has been the development of AI-driven flood prediction systems, enabling insurers to provide more precise and accessible coverage for businesses and homeowners vulnerable to flooding.
A standout collaboration at the hub involved local financial institutions and global reinsurers to introduce parametric insurance for SMEs across Southeast Asia. These insurance products pay out automatically when certain weather conditions, like heavy rainfall or strong winds, are met – helping businesses bounce back quickly after disasters, without the usual delays of claims assessments.
The real-world effects are clear: clients receive timely financial support, which boosts their confidence to operate and expand, even in areas at higher risk. For local communities, these innovations foster resilience, minimize economic disruption, and speed up recovery after extreme weather events. By weaving ESG principles into their offerings, the hub also promotes sustainable practices among businesses, supporting broader climate adaptation goals.
Another case worth noting comes from Canada where the OSFI B-15 rules are pushing insurers and financial institutions to stress-test their portfolios against a range of climate scenarios, requiring them to model both physical and transition risks, like floods, wildfires, and the impact of net-zero policies. This has led to new collaborations between insurers, banks, and climate data providers to develop sophisticated risk models and scenario analyses. For example, Canadian lenders are working with environmental consultants and tech startups to refine flood and wildfire risk modelling, helping them understand potential exposures and prepare adaptive strategies.
Iforii: Looking ahead, what should be the insurance industry’s top priority in tackling climate risk?
Focus on building real resilience. Looking ahead, the insurance industry’s greatest opportunity lies in embedding resilience at every level of the insurance value chain – and making that resilience matter for people, businesses, and communities. This means moving from reactive payouts to proactive risk reduction: supporting clients with risk prevention services, investing in climate-smart infrastructure, and collaborating with governments to close protection gaps.
Picture insurers collaborating with municipalities to develop green infrastructure that naturally manages floodwaters or providing homeowners with access to advanced warning systems and flexible, affordable coverage. By expanding partnerships and sharing data across sectors, insurers can help communities recover faster and adapt smarter-turning climate risk into an opportunity for social and economic renewal.
Ultimately, building resilience is about empowering communities to thrive in a changing climate. Insurers who embrace innovation, partnership, and a client-first mindset will not only weather the storms ahead but also help create a more secure and sustainable future for everyone.
Iforii: Many thanks Silvia, for sharing your valuable insights and perspectives.
If you’d like to explore this topic further, you can reach out to Silvia Savini directly at: sunstone@silviasavini.com
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Mariëlle van Jaarsveld & Bertina Bus