The very foundations of the global insurance system are being undermined by the growing risks from nature and the changing climate.

Environmental group, WWF, today issued its latest report on the challenges faced in tackling the Insurance Protection Gap, finds that the climate and nature crisis is undermining the foundations of the insurance system. It added the financial sector’s canary in a coal mine was already sounding the alarm as growing risks test underwriters.

The report evidences a growing ‘insurance protection gap’ across multiple countries. As extreme weather events become more frequent, severe and harder to predict, insurers are forced to increase premiums, restrict coverage, or withdraw from high-risk areas. The white paper was developed by WWF with input from insurers, regulators, and academic and financial experts.

From homes to agriculture or insurance against supply chain disruptions, the protection gap is widening, leaving people and businesses with either higher bills or less or even no protection. It added as a result insurers are increasingly sounding the alarm on the risks to their operations.

The WWF added in 2025, the United Nations Office for Disaster Risk Reduction estimated the annual disaster risk costs for 2023 were around £1.7 trillion.

“In the UK, increasingly frequent extreme weather events have meant weather-related claims are rising,” it added. “Tenbury Wells in Worcestershire has been flooded seven times in four years times with flooding becoming an almost annual event, meaning insurers cannot offer cover.

“Governments need to address the root causes of risks, as well as managing the protection gap in the short term. The Climate Change Committee has repeatedly found the UK government’s national adaptation planning to be inadequate.”

The report cites evidence that every £1 invested in climate resilience can save up to £13 in avoided losses.

The report highlighted the example of Flood Re, a joint initiative between the UK government and insurers, is designed to maintain the affordability of flood insurance for high-risk homes. The scheme will end in 2039 when the UK insurance market will return to fully risk reflective pricing for flood insurance, but it is covering an increasing number of properties, and efforts to increase resilience have not progressed as needed.

“Flood Re only reinsures homes built before 2009 and doesn’t cover businesses,” the WWF explained. “There is no equivalent reinsurance scheme to cover damage from other types of extreme weather such as storms, wildfires and drought.

Ed Steeds, WWF’s senior finance policy adviser said: “The insurance industry is the canary in the coalmine for the entire financial system’s exposure to the impact of climate change and nature loss. We all need protection from risk: without insurance, extreme weather events can become financial disasters for individuals, businesses, farms and communities.

“Our insurance industry employs 300,000 people, earns £89 billion per year and manages investments of £1.4 trillion. We need the UK Government to improve risk assessment and adaptation planning, continue to reduce carbon emissions, and invest in nature to build resilience so we can maintain viable insurance markets.”

The organisation added insurance is a cornerstone of prosperity. Reduced coverage combined with growing climate risks threatens household finances, the economy, the financial sector, and government budgets.

Healthy ecosystems materially reduce flood, heat, and storm damage and are better value than engineered defences. However, these ecosystem services are rarely valued in loss estimates or integrated into insurance pricing.

The report calls for a strategic approach to reduce insurance protection gaps and that:

• Policymakers and insurers develop a shared understanding of the risks and the role of insurance in resilience planning, including direct losses from extreme weather and the wider economic impacts.
• Governments must reduce climate emissions, working with insurers to invest in the net zero economy to reduce further risk of extreme weather.
• Increase investment in nature-based solutions that deliver cost-effective protection against floods, heat, and storms
• Ensure interventions in the insurance market and insurance regulation support greater resilience.

Laurence Tubiana, (pic) special envoy to Europe for COP30 said: “The insurance protection gap leaves people vulnerable as extreme weather events hit people hard. With over half of climate-related losses uninsured globally – and more than 90 percent in developing countries – this is no longer just an insurance market issue, but a systemic threat to people’s livelihoods, economic resilience and even financial and fiscal stability.”

“Flood Re only reinsures homes built before 2009 and doesn’t cover businesses, there is no equivalent reinsurance scheme to cover damage from other types of extreme weather such as storms, wildfires and drought.’’