Natural catastrophes caused global insured losses of $154 billion in 2024, a number that’s 27% above the 10-year average, while the California fires of 2025 have projected losses between $28 to $45 billion.
As the climate changes and insurance markets continue to crack, insurers are pulling out of high-risk areas and driving up premiums, even in unaffected areas, to cover their losses.
The capital markets will inevitably need to adjust to these changes. As insurance becomes more expensive, or unavailable, and property values decline in high-risk areas, wider financial impacts will be triggered on mortgage markets and real estate-backed securities. In addition, companies in affected regions will struggle with higher costs and capital constraints, leading to repricing in the stock and bond markets.
All of these factors lead us to a conclusion: capital will increasingly flow toward climate adaptation and resilience, and the markets will reward the companies that are best positioned to respond to the structural shift that is taking place.
We believe that the time to position capital is now, before these themes become mainstream and valuations rise.
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