The world is heating up and the cost of climate impact are rising global businesses have been warned.

Broker Lockton has issued new analysis which said climate-related losses are increasingly evident through a combination of physical damage, operational disruption, supply chain dependencies, and gradual environmental change.

As a result, a growing proportion of losses either remain uninsured or fall outside the scope of conventional insurance.

Lockton’s report, Global heating: navigating a new business reality, examined the  impact of global heating across a range of sectors. In agriculture for example, the largest financial consequences may arise from declining yields or changing growing conditions rather than from physical damage to assets. In August 2026, the European Commission’s Joint Research Centre cut its yield forecasts for major EU summer crops by as much as 14 per cent. Multinational organisations with complex supply chains face a parallel challenge, with exposure to hundreds of suppliers across multiple tiers and geographies making it impossible to insure every potential point of failure.

However the costs are now significant and how they are met will require a new approach the broker added.

The report explained: “Global heating has firmly moved from a future scenario to a present-day business reality. In January 2025, the Palisades and Eaton fires ripped through Southern California at the culmination of what was then the hottest decade on record. The preceding 12 months had been the warmest ever recorded globally, and the first calendar year in which global mean temperature exceeded 1.5°C above the 1850–1900 average. But in 2026, even those records are under threat.

“As temperatures rise, they are increasingly accompanied by climate volatility. Across much of the Northern Hemisphere, extreme heat and drought followed one of the wettest winters in recent history, leaving soil moisture levels depleted and fuelling heightened wildfire activity. Elsewhere, severe flooding, storms, and prolonged droughts continue to affect communities and businesses across multiple continents.

“The economic consequences of these changes are impossible to ignore. In the EU alone, weather- and climate-related extremes caused an estimated €822 billion in economic losses between 1980 and 2024. Roughly a quarter of that damage occurred during the last four years alone.

“But a hotter climate does not only express itself through dramatic catastrophes. Often, losses emerge through slow, compounding changes that are less visible, but no less significant. Rising sea levels, changing rainfall patterns, declining water availability, and increasing heat stress are gradually reshaping the conditions in which businesses operate. Over time, these changes can affect agricultural yields, strain infrastructure, increase operating costs, disrupt transport networks, and alter the viability of entire regions.”

Blake Roseveare, head of specialty at Lockton, said: “Our research shows that global heating is changing the status quo. Organisations are encountering greater underwriting scrutiny with tighter terms and are seeing financial consequences of global heating that do not fit within the usual insurance structures. This is widening the protection gap and increasing demand for alternative approaches to risk transfer that will complement traditional solutions.”

The report suggests that, as climate-related losses increase, so too must the mechanisms used to finance them. Organisations are increasingly adopting a blend of traditional insurance, retained risk, and alternative structures. The report explores the growing role of parametric insurance, captives, catastrophe bonds, and other alternative risk-transfer mechanisms as organisations seek more flexible approaches to financing climate-related risk.

Paul Jones, head of Parametric Solutions at Lockton, said: “Parametric insurance is one of the most prominent mechanisms of risk transfer, increasingly being used for managing global heating risk. Structuring cover around weather-related exposures is flexible and multifaceted. Capturing severe events such as drought, the long-term impacts of high temperatures, such as wildfires, and the subsequent risk of excess rainfall and pluvial flooding can be done with effective risk transfer solutions that may otherwise be uninsurable in the traditional risk transfer market.”