Aon plc, a global professional services firm, states that evolving flood and drought patterns are reshaping risk profiles across global insurance and reinsurance markets, according to its 2026 Climate and Catastrophe Insight (CCI) report released ahead of Earth Day.
Drawing on its catastrophe data and forward-looking climate modelling, Aon reports that physical climate risks are continuing to change, with implications for communities, policymakers and insurers. Aon estimates that global economic losses from flooding exceeded $42 billion in 2025, contributing to a cumulative total of approximately $2 trillion since 2000.
Aon also identifies drought as an increasingly important contributor to secondary perils, attributing around $13 billion in economic losses to drought-related impacts in 2025.
According to Aon, these effects extend beyond direct damage, influencing broader economic systems, particularly in the context of rising energy demand and water stress. Aon indicates that these trends are observable globally, with notable impacts in the United States.
Based on Aon’s Climate Risk Monitor, rainfall-driven (pluvial) flood risk in the US could increase by roughly 12 percent under a medium-emissions scenario and about 19 percent under a high-emissions scenario by mid-century.
Aon notes that in 2025 the U.S. recorded 14 separate 24-hour rainfall events consistent with a 1-in-1,000-year flood level, alongside significant flash flooding in Central Texas and widespread flooding in the Mississippi Valley.
Aon further reports that flood-related losses were also significant internationally.
In China, Aon identifies flooding as the country’s largest loss event in 2025, with estimated damages of $14 billion. Aon’s projections suggest that other regions, including parts of Africa, may face increasing exposure to extreme precipitation and flash flooding.
From a policy perspective, Aon highlights protection gaps and the need for updated resilience strategies. Citing National Flood Insurance Program (NFIP) data, Aon states that only 2.6 percent of residential properties in US counties receiving NFIP payouts for 2025 flood events were covered by NFIP policies. At the same time, Aon observes that private flood insurance uptake has increased, with both policy counts and premiums more than doubling between 2020 and 2024.
Aon notes that the evolving balance between public and private insurance provision presents both risks and opportunities. According to Aon, effective risk management will depend on regulatory measures, land-use planning, building standards and investment in both traditional and nature-based infrastructure.
Aon also highlights the role of mitigation strategies, including nature-based solutions such as wetlands and coastal ecosystems used alongside engineered defences. In addition, Aon points to emerging concepts such as amphibious housing, designed to adapt to rising floodwaters, as potential tools for reducing losses.
Based on these trends, Aon states that organisations integrating forward-looking climate analytics into planning, underwriting and investment processes may be better positioned to manage future risk. Aon advises insurers and reinsurers to review exposure concentrations and expand the use of climate-informed scenarios across underwriting, product development and capital management.
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.”
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, 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.”
