Insurers grapple with record losses as AI and climate risks escalate in 2025
The insurance industry faces mounting challenges as risks grow in scale and complexity. New data reveals that global insured losses from natural catastrophes hit USD 107 billion in 2025, with secondary perils alone accounting for 92% of the total. Meanwhile, the rapid spread of AI and evolving cyber threats are reshaping how insurers assess and manage exposure.
London Risk Week, set to begin next Monday, will bring these issues into sharp focus as industry leaders gather to address emerging dangers and opportunities. Natural catastrophes dominated insurer payouts in 2025, with secondary perils—such as floods, wildfires, and severe storms—causing nearly all insured losses. The UK alone recorded USD 0.8 billion in such losses, a fraction of the global total. Experts warn that, in a worst-case scenario, insured losses could surge to USD 320 billion by 2026.
AI adoption is accelerating across industries, transforming economic growth but also introducing fresh risks for insurers. While the technology promises better decision-making and efficiency in the London Market, it also creates new and complex exposures that firms must navigate. At the same time, cyber threats continue to evolve, leaving many businesses vulnerable.
Small and medium-sized enterprises (SMEs) and micro-SMEs remain particularly exposed, with cyber underinsurance rates ranging from 5-10% for the smallest firms to 10-20% for larger SMEs. This gap highlights the urgent need for better risk assessment and coverage solutions as digital dangers grow more sophisticated. The insurance sector must adapt quickly to a shifting landscape of natural disasters, AI-driven risks, and cyber vulnerabilities. With London Risk Week approaching, discussions will likely centre on strategies to mitigate losses and close protection gaps. The scale of potential losses—both from climate-related events and emerging technologies—demands proactive measures from insurers worldwide.
