Extreme Heat Is the Biggest Threat to Insurers and Businesses

Extreme Heat Is the Biggest Threat to Insurers and Businesses

By Chelsea Harvey & E&E News

CLIMATEWIRE | Extreme heat worldwide is one of the biggest threats to society, industry and the insurance business.

A new report from global reinsurer Swiss Re warns that the growing dangers of high temperatures are expected to be felt inordinately by the insurance sector, which underwrites financial losses related to property, business, and human health and life.

Extreme heat can disrupt transport and energy systems, cause electrical outages and wildfires, and exacerbate the risk of illness and death. That threatens to have expensive ramifications for insurers.

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“Extreme heat used to be considered the ‘invisible peril’ because the impacts are not as obvious as of other natural perils,” said Jérôme Haegeli, Swiss Re’s group chief economist, in a statement. “With a clear trend to longer, hotter heatwaves, it is important we shine a light on the true cost to human life, our economy, infrastructure, agriculture and healthcare system.”

The risks were outlined in Swiss Re’s annual SONAR report, which highlights emerging hazards for businesses and insurers. The list tends to include an array of disruptive topics — from technological or medical advancements, like artificial intelligence or evolving pharmaceuticals, to structural issues like waning investments in health care systems or infrastructure.

Climate-related threats often make the list.

This year, extreme heat is No. 1.

High temperatures are the biggest weather-related killer in the world, causing more deaths than hurricanes, wildfires or floods. It affects agriculture, infrastructure, transportation, water systems, energy systems and other aspects of society.

That makes it a growing threat to multiple sectors of the insurance industry.

Property and specialty insurance are most at risk, the report warns. Global insured losses from wildfires reached $74 billion between 2014 and 2023. High heat can also damage infrastructure, even in places historically home to mild climates. Infrastructure in cooler locations has often not been built to withstand the impacts of rapidly rising temperatures, the report said.

Life and health insurance is also a major concern. The report notes that extreme heat is likely to spark rising claims in both life and medical insurance, as well as workers’ compensation, because accidents are more likely to occur when people are subjected to heat stress. Employers who fail to provide adequate water, rest and other safety measures for outdoor workers may also face liability claims.

The report says people who are most vulnerable to heat risk, such as outdoor workers and residents in lower-income communities, often have less life and health insurance coverage.

Heat made the list in previous years, but this is the first time it has risen to the top.

The 2024 report pointed to the role of climate change in exacerbating civil unrest, terrorism and armed conflict, indicating that rising temperatures are a growing threat to international security. It also warned of the cascading impacts of natural disasters, like floods and wildfires, which are worsening with global warming.

The 2023 report highlighted new risks in the Arctic, as melting sea ice opens up new trade routes and increases the risk of geopolitical tensions in the region. It also pointed to growing interest in solar radiation management, a hypothetical form of geoengineering that would artificially lower the planet’s temperatures — with many potential risks and uncertainties still to explore.

In addition to heat, this year’s report highlighted threats from the growing risks of mold and other fungi, AI-related deep fakes and disinformation, drone technology, plastics and ultraprocessed food.

It also points to the growing risk of litigation against companies that could be viewed as responsible for the damages of extreme heat. That could lead to lawsuits against engineers who worked on failed infrastructure and cases brought against fossil fuel companies for their role in the progression of global warming.

Extreme heat is also a growing risk to financial markets and insurers’ assets, the report suggests. The industry’s investments have reaped it billions of dollars in profit even as it pays more in insurance claims for climate-related damage.

“As frequency and severity of extreme heat events intensify, markets will likely increasingly price in the risks posed by extreme heat events,” the report said.

At the same time, rising temperatures can exacerbate other threats. The report highlights the growing risks of toxic fungi, which can affect human health, agriculture and infrastructure. Fungi thrives in warmer temperatures.

Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2025. E&E News provides essential news for energy and environment professionals.