Climate and nature risks fuel multi-billion insurance protection gaps
A new WWF white paper, “Tackling the Insurance Protection Gap: leveraging climate and nature to increase resilience ”, warns that degrading ecosystems are amplifying climate risks and driving uninsured losses across advanced economies.
The paper examines the link between climate change and nature loss and the global insurance protection gap. A complementary policy brief translates these findings into targeted recommendations for governments, financial regulators and insurers to strengthen resilience and keep societies insurable.
While many mainstream analyses identify climate change as the primary environmental driver of rising insurance premiums and widening protection gaps, the report shows that nature loss is an often overlooked but powerful force that amplifies physical climate change risks, and that protecting and restoring nature is one of the most effective ways to strengthen resilience and reduce those risks. Degraded ecosystems are less able to act as natural buffers against extreme weather impacts, reinforcing a self-perpetuating destructive cycle in which increasingly frequent and severe events hit ever less resilient communities. For example, in areas of widespread deforestation, the risk of a large-scale flooding event can increase by as much as 700%. The resulting economic and financial consequences from extreme weather events and chronic climate hazard are escalating rapidly. Global disaster-related losses reached an estimated US$2.3 trillion in 2023, including indirect and ecosystem costs.
The white paper analyses the insurability challenge beyond property insurance, demonstrating how climate and nature risks are also driving losses across health, agriculture, liability, business interruption and infrastructure – increasing health costs, reducing productivity, raising food prices and leaving supply-chain disruptions uninsured.
As insurers respond by raising premiums, limiting coverage or withdrawing from high-risk areas, more people and businesses are being left exposed. In the United States, the insurance protection gap averaged US$64 billion per year between 2021 and 2024, while in the European Union it reached €59 billion per year between 2021 and 2023.
The white paper finds that extreme weather and widening insurance protection gaps are increasingly affecting incomes, asset prices, credit and mortgage markets, and public finances, posing growing risks to economic stability and social cohesion. Public budgets are particularly exposed, as governments face rising costs for emergency response and reconstruction, added pressure on public insurance schemes and falling tax revenues, while damage to nature remains underfunded and restoration costs largely fall on taxpayers.
The paper also shows that prevention delivers far greater value than post-disaster relief. In the US, every dollar invested in climate resilience can save up to US$13, while in the UK each £1 spent on flood risk management avoids £8 in damages. Protecting and restoring nature is among the most effective preventive measures: healthy ecosystems such as forests, wetlands and mangroves reduce risks from floods, storms and heat. In the Alps, protective forests provide benefits worth around CHF 4 billion annually and can be up to 25 times more cost-effective than engineered solutions.
Building on the report´s findings, WWF´s policy brief calls for a strategic shift in how governments and financial regulators address the insurance protection gap, placing climate mitigation, nature restoration and insurance policy on an equal footing. Without tackling the root causes of risk, efforts to strengthen financial resilience will remain incomplete and leave people vulnerable.
WWF recommendations to close the protection gap and strengthen resilience for people, nature, businesses, governments and financial regulators
Key recommendations focus on valuing nature and nature-based solutions in risk assessments, embedding ecosystems into adaptation and recovery planning, aligning insurance regulation with risk reduction incentives, and accelerating action to cut emissions and halt nature loss.