Climate risk has moved from the margins of deal-making to its centre, and insurance - its availability, its cost and its future trajectory - is increasingly the mechanism through which that shift is felt in valuations, financing terms and exit outcomes, according to Aon's latest report, Climate Risk as a Value Driver Across the Deal Lifecycle.
The findings arrive at a moment when the financial cost of climate-related events is impossible to ignore. Aon's own 2026 Climate and Catastrophe Insight found that natural disasters caused an estimated $260 billion in economic losses in 2025, with more than half remaining uninsured.
The report's sharpest message for the insurance industry is the reframing of insurability itself, not as a binary question of whether cover can be obtained, but as a dynamic variable that can shift materially over a deal's hold period and erode asset value in ways that standard due diligence rarely captures.
The global data also reinforces the urgency. Global economic losses from natural catastrophes were $220 billion in 2025, about 49% of which were insured, the highest insured share on Swiss Re's sigma records. Protection gaps remain especially wide in emerging economies, where 80 to 90% of catastrophe losses are typically not covered by insurance.
Long-term global insurance losses from natural catastrophes continue to follow a 5 to 7% annual growth rate in real terms, with Swiss Re warning that sustained adaptation and risk mitigation are increasingly decisive to maintaining long-term insurability.
On the other hand, the California wildfire market provides the starkest illustration of where that trajectory leads. The Los Angeles wildfires of January 2025 caused $40 billion in insured losses, while secondary perils, including severe convective storms, wildfires and floods, accounted for a record 92% of total global insured losses in 2025. In the highest-risk wildfire zones, one in five homes has already lost coverage, demonstrating in real time how insurance market exits can materially reshape asset values and long-term risk retention.
According to Aon's report, traditional red, amber, green risk ratings are no longer adequate and climate assessments must translate physical exposure directly into financial terms, covering expected losses, operational disruption, capital expenditure requirements and, critically, the potential impact on insurance availability and pricing over time. More than half of dealmakers surveyed (56%) now rank climate and environmental due diligence among their top priorities, making it the most significant area of focus across the transaction lifecycle.
The work also now goes well beyond checking whether a target has cover in place. Sophisticated diligence considers change-of-control issues, gaps in programme design, uninsured exposures, compliance with contractual and statutory requirements, and the shape and cost of the go-forward programme.
Globally, climate-related insured losses have exceeded $100 billion annually since 2020, leading to rising premiums and reduced availability of cover, particularly in high-risk regions such as California, Florida and parts of Australia and Canada. For deal teams, the implication is clear: soft market conditions today do not guarantee insurability at exit.
Regulatory scrutiny of climate risk management is intensifying across major insurance markets.
The European Banking Authority's 2025 ESG Risk Management Guidelines require banks to identify and mitigate climate-related risks, while courts in multiple jurisdictions are expanding their scrutiny of corporate climate conduct, creating an evolving liability landscape that insurers and their clients must navigate simultaneously.
Swiss Re's head of catastrophe perils has warned that the below-trend losses seen in 2025 are the result of favorable variability rather than any easing of underlying risk, and that if losses return to normal long-term levels, insured losses could reach $148 billion in 2026, with a peak-loss scenario pointing to as much as $320 billion.
Aon's report delivers a consistent message - climate risk is no longer a peripheral ESG consideration. It is a core pricing, underwriting and product design challenge, and the window for treating it otherwise is closing.
