Climate risks present major challenges for companies – from insurance coverage gaps to rising premiums. Here are the key points you should keep in mind:
Tip: Regularly reviewing your policies and making targeted adjustments can minimize financial risks and help keep premiums stable. Consulting with climate risk experts or using digital assessment tools can further enhance your company’s resilience.
Below, we take a look at typical coverage gaps and their impact on businesses.
Insurance gaps arise when policies do not cover damages caused by climate-related events, or only cover them partially. These gaps are especially common with extreme weather events such as heavy rainfall, flooding, or droughts, which are becoming more frequent due to climate change. The OECD notes that these protection gaps are widening globally, leaving businesses exposed to significant financial losses.
Certain industries are particularly vulnerable to such gaps:
Insufficient insurance coverage can lead to significant financial burdens. The German Environment Agency recommends tailoring insurance solutions specifically to address rising climate risks. The European Union also emphasizes the importance of climate resilience and adapting insurance solutions to address these risks. If protection is lacking, companies must bear the costs themselves. This can result in production stoppages, delivery problems, and lost revenue. In the long term, this may also impact credit ratings and lead to less favorable loan conditions, as noted by S&P Global Ratings.
In addition to existing coverage gaps, increasing claims costs are the main drivers behind rising premiums. This trend is consistent with global observations, where climate-related disasters are causing significant economic impacts. Costs from natural hazards rose from €4 billion in 2022 to €5.6 billion in 2023. For 2024, the GDV expects a further increase to €7 billion. The Swiss Re Institute further notes that the insurance sector is under pressure to adapt to the rising frequency and severity of climate events.
The GDV emphasizes that cities, infrastructure, and buildings urgently need to be adapted to changing climatic conditions.
Insurance premiums are primarily influenced by two factors:
This trend is causing some insurers to withdraw from regions with particularly high risks, as seen in recent insurance market exits in high-risk US states.
Without targeted climate adaptation measures, premiums could double over the next ten years. The GDV warns of a dangerous dynamic of rising losses and ever-increasing costs. A McKinsey analysis suggests that companies investing in resilience may be able to better control premium growth and maintain insurability.
After analyzing coverage gaps and potential risks, the next step is to review your insurance policy. A systematic check helps to identify climate risks and close existing gaps.
A structured comparison between your policy and potential climate risks is essential. Pay attention to the following points:
The following steps can help expand your protection:
Targeted risk mitigation can help reduce costs. This includes:
Modern climate risk strategies combine insurance with early warning systems and data integration. Companies increasingly benefit from sensors (e.g., water level monitors, heat warnings), weather data APIs, and digital risk dashboards that provide proactive alerts. These systems can often be linked with tools like Munich Re or Sust Global, helping to activate measures in time – and reduce premiums in the long run. The World Meteorological Organization highlights the effectiveness of early warning systems in reducing disaster losses.
In addition to reviewing insurance policies, specialized tools and experts offer support for quantitative analysis and management of climate-related risks.
Integrating climate risks into ESG strategies is crucial for comprehensive insurance and risk management. By embedding these risks into your sustainability strategy, companies can plan for the long term and manage risks more effectively. Climate risks are an integral part of the double materiality analysis under CSRD. Both physical risks (e.g., extreme weather) and transitional risks (e.g., CO₂ pricing) must be identified, assessed, and reported. Tools like “Location Risk Intelligence On-Demand” or Jupiter Intelligence provide valuable data points for risk assessments, which can be directly incorporated into ESRS E1 or TCFD reporting.
The SaaS tool “Location Risk Intelligence On‑Demand” from Munich Re offers a flexible solution for assessing physical and climate-related risks. It analyzes 28 hazard scores (15 for natural hazards, 13 for climate risks) and provides forecasts up to the year 2100. Pricing starts at €100 per location and is fully usage-based, with no minimum term. The Expert Module can also be added, expanding the analysis to 64 climate variables such as wind, water, and temperature.
In addition to Munich Re, there are other providers offering climate risk analysis for locations. They differ in resolution, focus, and pricing structure:
| Provider | Focus Areas | Data Coverage / Timeframe | API / Integration | Pricing Structure | Special Features |
|---|---|---|---|---|---|
| Munich Re | Natural hazards & climate risks | Up to 2100 | Yes | from €100/location | No minimum term, very robust |
| Jupiter Intelligence | High-resolution climate modeling | Up to 2100 | Yes | Project-based | Very fine spatial resolution |
| Sust Global | Global risk maps for investors & companies | Historical & scenarios up to 2100 | Yes | License / volume | Satellite data & AI combined |
| Climate X | Site risks for real estate and infrastructure | Up to 2100 | Yes | SaaS per user / asset | Particularly strong in the UK market |
| Mitiga Solutions | Natural disasters and extreme events | Variable | Yes | On request | Acquisition partner of Cervest |
If your company is new to location risk and climate adaptation, I am happy to assist with tool selection, site assessment, and integration into existing sustainability processes – including alignment with CSRD, TCFD, or materiality analysis. Whether you need a one-time analysis or long-term integration into your reporting, I can help you find the right solution and make informed decisions.
Climate risk data can be used not only for insurance purposes but also for strategic decisions – for example, when:
This way, climate risk analyses become a real lever for business resilience and risk reduction. The CDP and UNEP FI both recommend integrating climate data into long-term site and investment planning.
The German Environment Agency emphasizes the importance of expanding prevention and targeted risk transfer to better manage climate risks. The OECD also highlights the need for innovative insurance solutions and public-private partnerships to close protection gaps.
Companies should take the following steps to effectively protect themselves against climate-related risks:
Proactive risk management and targeted integration of ESG aspects will secure your company’s insurability and strengthen its resilience in the long term.
The EU Commission emphasizes that insurance-based risk transfer alone is not enough. Companies should actively invest in resilience, risk prevention, and site analysis – not least because these factors are increasingly considered in funding programs, ESG ratings, and lending decisions. The UNEP FI and OECD both stress the importance of holistic adaptation strategies.
An overview: Answers to key questions about climate risks and insurance.
A climate insurance gap arises when insurance policies do not cover damages from climate-related events, or only cover them inadequately. As a result, companies may face unexpected financial burdens from extreme weather or consequential damages. The OECD provides further insights into the global scale of these gaps.
Premium costs can be lowered through targeted risk mitigation measures. Investments in protection systems or preventive actions reduce the likelihood and extent of damages, which in turn impacts premium costs. The Swiss Re Institute notes that companies demonstrating strong risk management often benefit from more favorable insurance terms.
Experts should be consulted when a comprehensive analysis of existing insurance coverage is needed. They identify possible gaps, assess risks, and develop tailored solutions for better protection against climate-related damages. The UNEP FI recommends engaging with climate risk specialists for complex or multi-site operations.
Which industries are particularly affected?
Agriculture, construction, logistics, and manufacturing are often directly impacted by climate-related damages – whether through crop failures, weather-related construction delays, or disrupted supply chains. These sectors should pay special attention to insurance coverage for climate risks. See World Economic Forum for sector-specific risks.
How do climate risks affect insurance premiums?
The higher the climate-related risk of damage, the higher the premium. Factors such as location, industry specifics, and historical losses influence premium calculations. In high-risk areas, costs rise significantly, especially if protective measures are lacking. The FEMA Risk Rating 2.0 initiative in the US is a recent example of risk-based premium adjustments.
How can you check if your insurance is sufficient?
A structured analysis helps: Which natural hazards are covered? What exclusions or sublimits exist? What is the deductible? Only those who know the answers can identify gaps and make targeted improvements. The CDP provides self-assessment tools for businesses.
What measures help close coverage gaps?
Additional coverage for specific climate risks, adjusted deductibles, or joining risk pools are proven approaches. Depending on industry and location, there are individual options to optimize protection. The Insurance Development Forum offers guidance on collective solutions.
What role do digital tools and early warning systems play?
Digital solutions like “Location Risk Intelligence On-Demand” enable proactive risk analysis. They combine weather data with location information to help identify risks early and take preventive action – ideally in combination with insurance. The World Meteorological Organization supports the integration of such systems to reduce disaster impacts.
How are climate risks considered in ESG strategy?
Climate risks are a fixed component of double materiality under CSRD. They must be systematically identified, assessed, and addressed in the sustainability strategy. A robust insurance solution supports ESG governance and builds trust with stakeholders. (Understanding Double Materiality in CSRD: A Key to Sustainable Success)