The firm’s 2026 Climate and Catastrophe Insight (CCI) report, which draws on Aon’s detailed catastrophe data and forward-looking climate modelling, underscores how physical climate risk is evolving and the implications for communities, policymakers and the insurance market. Its analyses show that global economic losses from flooding exceeded $42 billion in 2025 and $2 trillion since 2000.
Drought is also emerging as a major driver of secondary perils, contributing $13 billion in economic losses in 2025 alone. The peril is also responsible for far-reaching secondary impacts across the economy, particularly as energy demand continues to rise.
These dynamics are evident globally and are particularly pronounced in the U.S. Aon’s Climate Risk Monitor projects that U.S. pluvial (rainfall-driven) flood risk could increase by about 12 percent under a medium-emissions scenario and roughly 19 percent under a high-emissions scenario by mid-century. In 2025, the U.S. recorded 14 separate 24-hour periods with rainfall amounts equivalent to a 1-in-1,000-year flood – 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, said: “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.”
Recent experience also illustrates the breadth of flood risk globally. Flooding drove China’s highest loss event in 2025, causing an estimated $14 billion in damage, while forward-looking Climate Risk Monitor projections suggest that other regions, including much of Africa, could face increasing exposure to extreme precipitation and flash flooding.
For policymakers, the CCI report findings highlight the scale of protection gaps and the importance of re-examining resilience strategies. In the U.S., National Flood Insurance Program (NFIP) data show that in counties receiving NFIP payouts for 2025 flood events, only 2.6 percent of residential structures were covered by NFIP flood policies. At the same time, the number of private home flood policies and the premium paid for these policies more than doubled 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.
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.”
To support both risk transfer and risk reduction, the 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.
Based on the identified natural catastrophe trends, Aon believes stakeholders that proactively integrate forward-looking climate analytics into planning, underwriting, policy design and investment decisions will be better positioned to navigate a future defined by increased flooding, more severe drought and fewer but more damaging cyclones. The firm is advising (re)insurer clients to review exposure concentrations and expand the use of climate-conditioned scenarios in underwriting, product innovation and capital strategy.
Liz Henderson, head of climate risk advisory for Aon, said: “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.”
Aon’s 2026 Climate and Catastrophe Insight report is available here
For insights on the work of Aon’s Climate Risk Advisory team, click here
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