Brazil closed 2025 with sharply contrasting climate patterns that intensified drought across key agricultural regions, contributed to 684,000 km² of burned area, and set the stage for continued stress through the 2026 summer season, according to Howden Re Brazil's Q4 2025 Climate Impacts Report.
Released in collaboration with MeteoIA, the analysis points to increased regional climate variability driven by weak La Niña conditions and sustained global temperature increases, with the country's 2025 drought resulting in approximately $5 billion in losses, making it the most expensive drought globally last year, data from insurance broker Aon shows.
Despite the multi-billion dollar economic toll, Brazil's insurance penetration remains critically low, with the country's historical natural disaster coverage rate sitting at just over 5%, Munich Re analyst Tobias Grimm has noted.
The report documents contrasting precipitation patterns between September and December 2025. Rainfall exceeded normal levels in southern regions and portions of the Amazon, whilst the Southeast, Centre-West and interior Northeast experienced deficits.
"Between September and December 2025, rainfall surpluses in the South and parts of the Amazon sat alongside persistent deficits across the Southeast, Centre-West and interior Northeast," said Antônio Jorge da Mota Rodrigues, head of Howden Re Brazil.
The conditions intensified drought, limited reservoir recovery and contributed to increased burned areas, particularly in the Cerrado and Caatinga regions.
The climate impacts arrive as Brazil's reinsurance market confronts structural headwinds. AM Best maintains a negative outlook on the country's reinsurance segment, citing political uncertainty surrounding the 2026 elections and tax reform measures that have sharply increased costs for offshore reinsurers.
Recent tax changes have proven particularly acute, with offshore reinsurers now paying more than triple the foreign exchange transaction rates applied in previous years, AM Best noted. Regulatory restrictions on foreign assets have also limited domestic reinsurers' ability to expand abroad.
Agriculture was described as comparable to natural catastrophe exposure given its sensitivity to climate risks, though agricultural reinsurance declined 47% in 2024, said Ricardo Rodriguez Perez, senior financial analyst at AM Best.
Brazil's agricultural sector confronted disrupted planting schedules and crop damage in late 2025. The report notes increased exposure for the 2026 off-season maize crop across several production areas, with yields now determined more by rainfall timing and extreme events than seasonal averages.
The summer 2026 outlook indicates below-average rainfall and above-average temperatures for much of the Northeast, with continued constraints on water replenishment in the Southeast and Centre-West. Northern regions are expected to receive higher rainfall volumes, whilst southern areas may experience alternating wet periods and heat episodes.
Rodrigues stated that Brazil's climate risk now stems from compounding interactions of heat, drought, fire and severe storms occurring in succession. "This environment requires insurers and risk-exposed sectors to move beyond reactive assessment towards continuous, forward-looking climate intelligence," he said.
