Skip to main content
Marsh logo

Article

The silent signal: How extreme weather can impact pricing in a soft market

Organizations are increasingly concerned about the impact of weather-related events on their ability to secure affordable insurance coverage.
Person's name and title

By Amy Barnes , 

Global Head of Energy & Power, Marsh

01/15/2026 · 3 minute read

Organizations are increasingly concerned about the impact of weather-related events on their ability to secure affordable insurance coverage.

This concern is no longer theoretical. Our survey at COP30 revealed that 60% of respondents already view insurance affordability and availability as pressing concerns — a figure that jumps to 74% when looking ahead to 2030. As Amy Barnes, global head of climate and sustainability strategy at Marsh Risk, explained in a recent TED talk: “Insurance only works while extreme weather remains a risk. Where it becomes a near certainty, insurance becomes unaffordable and potentially not available.”

According to Guy Carpenter’s global analysis, insured property losses attributed to climate change are currently projected to increase by 1% annually, driven by the rising frequency and severity of weather-related hazards. When factoring in inflation, labor availability, and increased building density, the cost of insured losses may be higher. While the 1% represents a global average, the increase will not be felt evenly.

The “climate signal” — the change in insurance pricing attributable to weather-related trends — is most evident today in residential property markets, as discussed by Marsh McLennan Agency’s work in US personal lines insurance. However, in the commercial market, this signal manifests more subtly, requiring deeper analysis to fully understand its implications for organizational risk management. 

The complex dynamics of climate signals in a softening insurance market

Insurance markets move between hard and soft cycles, influenced by factors such as (re)insurer profitability, market capacity, capital costs and economic and regulatory pressures. Currently, the global insurance market is largely softening. This can mask the climate signal as commercial insurers generally become less selective about underwriting weather-related risks. The converse is also true; in a hardening market, we can expect that climate-impacted sites will feel a greater difference in their insurance programs, emphasizing the need for proactive resilience and risk management.

How organizations can capitalize on the benign market to prepare for future hardening

The current market presents a strategic opportunity for forward-thinking organizations to strengthen their resilience in anticipation of the next hard market cycle.

In a softer market, any premium savings realized can be strategically invested in resilience measures that could prove invaluable when negotiating with insurers during harder markets. Importantly, proactive risk management delivers benefits regardless of market conditions. Organizations are likely to experience a range of insurance market cycles over the course of their asset ownership, exposing them to potential fluctuations in insurance affordability (pricing, retentions, deductibles) and availability (coverage terms).

The business case extends beyond insurance benefits. According to the US Chamber of Commerce, “every US$1 invested in resilience and preparedness saves US$13 in long-term savings and avoided costs” — a compelling return on investment that encompasses operational continuity, asset protection, and competitive advantage.

Four strategic actions for organizations

In today’s evolving risk landscape, organizations should adopt proactive strategies to effectively manage extreme weather-related challenges. The following four actions provide a framework to enhance resilience, optimize risk management, and secure favorable insurance outcomes:

  1. Leverage climate analytics and implement adaptation strategies
    Analytics solutions, such as expected loss modeling under future climate scenarios, can help businesses understand how their insurance program performs under different climate scenarios. Climate risk assessments identify vulnerabilities and inform targeted adaptation measures. Our risk consulting teams model expected losses under future climate scenarios and provide advice on actions to reduce risks.
  2. Undertake climate change-aware risk engineering 
    Comprehensive risk engineering determines asset-level exposures and identifies interventions that result in measurable returns on investment. Climate-aware property engineering reports can support insurance market conversations by enabling organizations to demonstrate risk quality improvements and potentially secure more favorable terms.
  3. Embed resilience in the placement process
    Understanding natural peril exposure has become central to underwriting in many regions. Insurers assess both the likelihood of extreme weather and the vulnerability of the asset. Through our enhanced natural catastrophe modeling, we help businesses demonstrate risk quality improvements to insurers. Organizations should also seek incentives or co-investment from insurers for resilience initiatives (such as adaptation-linked insurance) and advocate for insurance policy wordings that allow for building back resiliently in the event of a loss.
  4. De-risk resilience solutions and identify innovative products
    As the risk landscape evolves, many businesses are exploring how insurance can support resilience across their value chain. Risk managers facing traditional market challenges can look to alternative risk transfer solutions, including the use of captive insurance or parametric products. Organizations are increasingly viewing alternative risk transfer solutions as the first line of defense against rising weather-related losses.

For more information on enhancing your climate resilience, explore our capabilities across Marsh and follow our partnership with the World Economic Forum as we continue to advance the conversation on insurability and climate throughout the year.

Related insights

default

Climate adaptation 2025 report
Hurricane formation atlantic ocean meteorological event aerial view natural disaster impact

How a holistic risk approach increases resilience in the face of a changing climate
Tackling the heat

Tackling the heat challenge: A shift from analysis to solutions for extreme heat risk