Climate change is leading to evolving natural catastrophe risks that are forcing insurers to re-evaluate their relationships with each other and the world at large, according to S&P Global Market Intelligence's Big Picture 2025 Outlook Report Series.

Within the series, the newly published Evolving Natural Catastrophe Risks includes analysis from S&P Global Market Intelligence's climate and insurance industry experts.

They highlight how secondary perils such as floods, fires and severe convective storms — as distinct from the insurance industry's peak perils of tropical cyclones and earthquakes — have made up a larger portion of catastrophe losses in recent years.

Insurers and reinsurers typically pick up the tab for natural catastrophes but the increasing frequency and severity of mid-sized events and hurricanes hitting previously unaffected areas has led to an overhaul of the industry's approach to those payouts.

Raymond Barrett, lead author of the report at S&P Global Market Intelligence said: "The insurance industry has often acted as an early warning system for individuals and industries looking to understand and mitigate future risk.

“With climate change expected to increase the severity and frequency of natural catastrophes, understanding this altered risk environment is paramount.

“Insurers have been beating the drum on a variety of climate-change risks for many years, so their current focus on extreme weather should be a cross-industry concern.“

Insurers are paying more for reinsurance and retaining more risks as a result of the larger role of secondary perils.

The risk landscape changed with Hurricane Helene’s inland damage to North Carolina.

The S&P report said: “Hurricanes generally cause the most destruction in coastal regions but in this case the Appalachian Mountains saw some of the most severe devastation from the storm.”

A lot of the economic losses caused by Helene were uninsured because flooding falls outside the terms and conditions of most insurance policies in the US.

Strategic planning and proactive risk management, the report said, would be vital to safeguard against evolving climate challenges.