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Climate change and the commercial insurance market

How rising catastrophe losses reach commercial property buyers through price, deductibles, roof terms and availability, and what to check at renewal in 2026.

4BusinessInsurance · Published October 10, 2026

Climate change reaches a commercial policy in four ways: the price of property insurance in exposed areas, the deductibles and sublimits attached to wind, hail and fire, whether an insurer will write the building at all, and the cost of the reinsurance behind it. Rising insured losses are not all climate. Swiss Re attributes most of the long-term growth to more valuable property in harm's way and higher rebuilding costs, with warming adding to some perils more than others. For a business owner the practical result is the same: read the deductible and roof terms as closely as the premium.

What the loss numbers show

Swiss Re Institute's full-year estimate, published in March 2026, put global insured natural catastrophe losses for 2025 at about $107 billion. A record 92 percent came from what the industry calls secondary perils: the storms, floods and fires that are not hurricanes: wildfire, severe convective storms and flood, rather than hurricanes or earthquakes. The Los Angeles wildfires alone were about $40 billion insured, the largest wildfire loss on Swiss Re's records, and severe convective storms added about $51 billion (Artemis summary of the sigma release).

Swiss Re calls 2025 a below-trend year, helped by no major U.S. hurricane landfall, and says insured losses have been growing 5 to 7 percent a year. Its trend-implied figure for 2026 is $148 billion. Aon's January 2026 climate and catastrophe report goes further: it says severe convective storms: hail, tornadoes and rising insured losses have overtaken tropical cyclones as the costliest insured peril of the 21st century, with about $61 billion of insured losses globally in 2025.

The first half of 2026 was quieter. Gallagher Re put global insured natural catastrophe losses at about $46 billion for the half, 28 percent below the 10-year average, the lowest first half since 2019 (Artemis, July 15, 2026). A quiet half does not reset the trend. Gallagher Re noted that El Niño emerging in June may reduce Atlantic hurricane activity but does not remove the chance of a landfall.

Climate, exposure and inflation are three different things

Underwriters separate them because they respond to different fixes.

  • Exposure growth. More buildings, with more expensive contents, sit on coasts, in wildfire-prone foothills and in hail corridors. Losses rise even if the weather does not change.
  • Cost inflation. The same hail event costs more when roofing, drywall and labor cost more. This is why valuation matters, covered in construction cost inflation and your property limits and insurance to value: setting the right building limit.
  • Hazard change. Scientists are more confident about some links than others: heavier rainfall, hotter and drier fire weather and higher storm surge from sea level rise are better supported than long-run trends in hail or tornado counts, where reliable records are short. Insurers price off catastrophe model output and recent claims, not climate theory, so a peril moves in price once it shows up in models and in loss runs.

How it reaches your policy

Channel What you see at renewal What to ask
Rate Higher rates in coastal, wildfire and hail-prone territories, lower where capacity is plentiful Is the change driven by territory, by your building or by the market?
Deductible A percentage of insured value for named storm, wind/hail or wildfire (named storm deductibles: how percentage wind deductibles work) What is the deductible in dollars, per location or per building?
Roof and cosmetic terms Actual cash value on roofs over a certain age, or cosmetic damage exclusions for metal How old is the roof, and when does the schedule start cutting payment?
Sublimits and exclusions A cap on flood, earthquake or wildfire inside a larger limit Does the sublimit share the policy aggregate?
Availability Non-renewal, or a move from admitted to surplus lines Who else will quote, and on what form?
Reinsurance Insurers cite their own catastrophe reinsurance cost See how reinsurance pricing flows into business insurance premiums

Each channel can move on its own. A building can see a lower rate and a larger deductible in the same renewal.

Where the cycle is in 2026

The market has softened for property. Marsh's Global Insurance Market Index (July 23, 2026) showed U.S. property rates down 13 percent in the second quarter. Guy Carpenter's U.S. property catastrophe rate-on-line index fell 16 percent through the July 2026 renewals and about 22 percent from the 2024 peak, per Artemis. Light U.S. hurricane landfalls and plentiful reinsurance capital help explain it (hard and soft insurance markets: what the cycle means for buyers).

Soft pricing is not the same as soft terms. On many accounts, insurers have kept the percentage deductibles, roof schedules and wildfire exclusions they added in the harder market even as rates fell. The next big event is what reprices the market, and one large Gulf Coast hurricane or a California wildfire can reverse a year of rate declines within a renewal cycle.

Worked example (hypothetical)

Say a distribution company in north Texas owns a warehouse with a $12 million total insured value. Last year it paid a flat $25,000 wind/hail deductible. At renewal the broker reports the rate is down 8 percent, which looks like good news. The quote also shows a 2 percent wind/hail deductible and actual cash value on the 14-year-old roof.

  • The 2 percent deductible is $240,000, nearly ten times the old deductible.
  • A hail loss that costs $400,000 to repair now pays about $160,000 before any roof depreciation, where it paid $375,000 last year.
  • The 8 percent premium saving is small next to the extra $215,000 of risk the company now carries on every wind/hail loss.

The company's choices include buying back a lower deductible, spending on a roof replacement, or setting aside a reserve. None of that appears if the review stops at the premium line. These figures are invented to show the mechanics, not market pricing.

What to do about it

  1. Convert every percentage deductible into dollars by location before you accept a quote.
  2. Update the statement of values (the statement of values: what property underwriters need) so the percentage applies to a current number and the building is not underinsured.
  3. Record roof age, material and last inspection, and any hardening work. Insurers credit it, and mitigation credits and resilient construction for commercial property explains which credits exist.
  4. Check business income. Wind, hail and fire shutdowns last longer when contractors are scarce, so look at the period of restoration and extended income terms.
  5. Ask for alternatives: parametric triggers (parametric insurance for businesses) or a deductible buy-back can fill the gap between a percentage deductible and your cash on hand.
  6. Know your state. Florida and California have had the sharpest dislocations and the most regulatory response (florida's commercial property insurance market, california's commercial property and wildfire market), but rules on nonrenewal notice, rate filing and residual markets are state law.

Climate disclosure and your own risk

Larger businesses may face climate-related disclosure from lenders, customers and, in some places, regulators (climate risk disclosure rules for businesses: where they stand in 2026). Insurers are also asking for more detail about locations, such as latitude and longitude, construction and protection features, which feeds their catastrophe models. Clean location data is worth more at renewal than a long narrative.

Key takeaways

  • Climate, exposure growth and rebuilding cost all drive rising insured losses. Swiss Re puts the trend at 5 to 7 percent a year and ties most of that growth to exposure and rebuilding cost.
  • Secondary perils produced a record 92 percent of 2025 global insured natural catastrophe losses, per Swiss Re, so hail, wildfire and flood matter as much as hurricanes.
  • Property rates were falling in mid-2026, but deductibles, roof schedules and exclusions often stayed tight. Compare dollars retained, not just premium.
  • Update values, document protection and hardening, and ask how each term changed. Those steps affect both price and availability.

Terms used in this guide

Catastrophe model Software that simulates thousands of hurricanes, earthquakes and other disasters against a portfolio of locations to estimate insured losses and odds. Named storm deductible A separate deductible, usually a percentage of insured value, for wind damage from a named hurricane or tropical storm, replacing the flat deductible. Insurance to value Carrying a property limit that matches the full value of what you insure, so a loss is paid in full and no coinsurance penalty applies. Deductible The amount of a covered loss the policyholder bears before the insurer pays, set in the policy and subtracted from the loss. Reinsurance Insurance an insurer buys from a reinsurer to transfer part of its risk, add capacity and protect its capital from large or accumulated losses. Sublimit A lower cap on what a policy pays for one coverage, peril or item, set beneath the policy's overall limit.

Related states

Florida Florida business insurance rules: comp at four employees (one in construction), PIP and $10,000 property damage auto minimums, HB 837 tort reform, Citizens. California California business insurance rules: workers' comp from the first employee, employee-paid SDI and paid family leave, pure comparative fault, 30/60/15 auto.

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