Broker Aon states that intensifying flood and drought patterns are reshaping risk profiles across global insurance and reinsurance markets, according to its 2026 Climate and Catastrophe Insight (CCI) report.
The broker estimates that global economic losses from flooding exceeded $42 billion in 2025, contributing to a cumulative total of approximately $2 trillion since 2000.
At the same time, Aon also identifies that drought is emerging as a major driver of secondary perils, attributing around $13 billion in economic losses to drought-related impacts in 2025. The peril is also responsible for far-reaching secondary impacts across the economy, particularly as energy demand continues to rise.
The broker indicates that these trends are observable globally, with notable impacts being felt in the United States.
Based on Aon’s Climate Risk Monitor, rainfall-driven (pluvial) flood risk in the United States could increase by roughly 12% under a medium-emissions scenario and around 19% under a high-emissions scenario by mid-century.
The broker also highlighted how in 2025, the US recorded 14 separate 24‑hour periods with rainfall amounts equivalent to a 1‑in‑1,000‑year flood, which marked the highest count since 2002, alongside catastrophic flash flooding in Central Texas and extensive inundation along the Mississippi Valley.
Michal Lorinc, head of catastrophe insight for Aon, commented: “Flood has become an increasingly impactful natural hazard over the past three decades, and in response Aon has have developed a wide range of innovative products and coverages to help our clients recover faster and more fully from flood events. Catastrophe modelling is also an area in which we continue to make significant investment, helping to bring clarity to our clients’ flood exposures and thereby aiming to affect better business decisions.”
Furthermore, Aon also identified flooding as being China’s largest loss event in 2025, causing estimated damages of $14 billion. Aon’s projections also suggest that other regions, including much of Africa, may face increasing exposure to extreme precipitation and flash flooding in the future.
From a policy perspective, Aon’s CCI report also highlights the scale of protection gaps and the need for updated resilience strategies. Citing National Flood Insurance Program (NFIP) data, Aon noted that only 2.6% of residential properties in US counties received NFIP payouts for 2025 flood events that were covered by NFIP policies.
At the same time, the broker also outlined that private home flood insurance uptake has increased, with both policy counts and premiums more than doubling between 2020 and 2024.
“This evolving public‑private mix presents both a challenge and an opportunity. Regulatory frameworks, land‑use planning, building codes and investment in nature‑based infrastructure will all be critical to managing the societal impacts of more frequent flooding, deeper drought and more destructive cyclones,” Aon added.
In order to support both risk transfer and risk reduction, Aon’s CCI report highlights the role of innovative mitigation approaches.
“Nature‑based solutions – such as wetlands and coastal ecosystems combined with traditional defenses – and novel concepts like amphibious housing, which are able to rise on flood waters, are gaining attention as cost‑effective ways to reduce losses before they occur,” the broker noted.
Based on these nat cat trends, Aon states that organisations integrating forward-looking climate analytics into planning, underwriting and investment processes may be better positioned to manage future risk.
The broker also advises insurers and reinsurers to review exposure concentrations and expand the use of climate-informed scenarios across underwriting, product development and capital management.
Andy Neal, managing director of public sector partnership for Aon, said: “Political uncertainty compounds the volatility of natural disasters. For policymakers, coordination between the public and private sectors will be increasingly important to expand coverage, invest in resilient infrastructure and use risk insights to inform planning decisions. Those that act early are better positioned to protect communities and economies over the long term.”
Liz Henderson, head of climate risk advisory for Aon, added: “Climate variability is increasingly influencing insurers’ business models, and these natural catastrophe trends point to a more structurally complex risk landscape where traditional views of risk, based only on historical experience, are no longer sufficient.”
