In 2022, the Climate Council estimated that one in 25 Australian homes, about 520,000 properties, would be effectively uninsurable by 2030 because of rising climate and extreme weather risk. In the ten most exposed electorates, the figure rose to one in seven.
The warning did not come out of nowhere. That same year, floods across southeast Queensland and northern New South Wales produced more than A$3 billion in insured losses, and in the worst hit towns some households faced premiums of tens of thousands of dollars a year, or could not get cover at all. Where insurance becomes unaffordable, property values, local lending and council budgets come under pressure too.
None of this is alarmism. It is what paying attention looks like.
From Queensland to California: a global pattern
It is not confined to Australia. In California, State Farm, the state’s largest home insurer, stopped accepting new homeowner applications in 2023, citing catastrophe exposure, construction costs and a difficult reinsurance market. Allstate had already paused new home policies there. California’s insurance regulator has since moved to let insurers use forward looking catastrophe models in pricing, a formal admission that past losses are no longer enough to price future risk.
Globally, the protection gap, the difference between economic losses from natural disasters and the losses that are actually insured, still runs well above US$100 billion a year. In 2025 about 49% of global catastrophe losses were insured, the highest share on record, which means more than half still fell on households, businesses and governments. In many developing economies, the great majority of losses are uninsured.
Why insurers price climate risk before anyone else
Insurance is the first mainstream market to price climate risk honestly and at scale, for a structural reason: insurers must price risk accurately to stay solvent. They cannot keep writing policies on assets whose risk is rising faster than premiums. When their models say a property is likely to flood, burn or be hit by a cyclone during the policy term, they must charge for it or leave. They have no political or ideological choice in the matter.
What it means for operations, finance and strategy
The first is operational. Any organisation with significant physical assets, whether real estate, farms, logistics hubs, factories or shops, now faces insurance pricing that reflects climate risk at each location. The days when insurance was a routine budget line, repriced a little each year on past losses, are ending. Insurance is becoming a large and volatile operating cost that varies sharply by site.
The second is financial. Lenders increasingly want evidence of adequate insurance, especially for commercial property and infrastructure. Where cover becomes unavailable or unaffordable, finance follows. The spiral, in which values fall because insurance is scarce, lending gets harder because collateral is impaired, and redevelopment stalls because the risk cannot be transferred, is already visible in several regional markets. Property portfolios concentrated in high risk locations are being revalued.
The third is strategic. The risk insurers are pricing is not limited to the places where losses are happening now. Reinsurance costs have risen globally and flowed into primary insurance in markets that once seemed safe. So organisations everywhere now pay insurance costs that partly reflect climate risk concentrated somewhere else. Insurance has become a channel through which global climate risk lands on local balance sheets.
The question every executive team should answer
The question for every executive team is simple, and it is not comfortable.
What is the physical climate risk to your assets, operations and supply chain over the next ten to thirty years? Have you modelled it with climate scenarios, not just by extending past losses? Have you put a number on rising premiums, and on what losing cover in specific places would mean for strategy? Have you assessed what happens to the value of particular assets if insurance disappears within their economic life?
If the answers are vague, or the assessment was done once, filed in a sustainability report and never fed into capital allocation or operating plans, the first clear sign of exposure will probably arrive as a sudden premium rise, a notice that cover will not be renewed, or a lender asking for more collateral. By then, the options have narrowed considerably.
The insurance industry is not predicting physical climate risk. It is responding to it.
That response is already changing the economics of operating in particular places around the world. For executives who treat climate risk as a reporting exercise rather than a strategic variable, the insurance market is delivering a correction.
The only question is whether your organisation adjusts before that correction arrives, or after.
Draws on Chapters One and Five of my book, Sustainability Leadership: The Global Outlook.