Global reinsurance broking and advisory firm Gallagher Re has suggested that, despite the “manageable nature” of catastrophe activity this year so far, the industry should continue to expect annual volatility in losses in the future.
According to the firm’s Q3 2025 Natural Catastrophe and Climate Report, global natural catastrophe activity remained “relatively mild” during the third quarter of 2025, with the abnormally low frequency of high-cost events resulting in a year well within annual catastrophe budgets for governments and the insurance industry.
“The quieter-than-expected tropical cyclone activity in the Atlantic and Pacific Oceans has resulted in Q3 insured loss totals estimated around $15 billion, the lowest total since 2016,” Gallagher Re added.
Preliminary estimates placed total global insured losses for the first nine months of 2025 at $105 billion, 8% below the decadal average, yet this still represents the sixth consecutive year in which losses have exceeded $100 billion, and the eighth year since 2017.
Gallagher Re also reported that preliminary total economic losses for Q1–Q3 2025 reached $214 billion.
This figure was below the 2015–2024 decadal average of $338 billion, with most losses occurring in the first half of the year.
Q3 2025 currently accounts for less than $50 billion, marking a notably subdued quarter for global catastrophe activity.
“This represented the lowest Q3 losses since 2006 ($55 billion). Q3 is historically the most expensive three-month stretch of the year with a 10-year average of $193 billion,” Gallagher Re said.
The impacts from the Palisades Fire and Eaton Fire in California remain the costliest sequence so far this year ($65 billion in economic loss, $40 billion in insured loss).
Notably, the US has now also reportedly registered 18 additional billion-dollar events, and all but one were SCS-related.
In total, there were at least 17 billion-dollar events outside of the US. The largest non-U.S. event was the catastrophic earthquake in Southeast Asia, which had its epicenter in Myanmar and caused an estimated $15 billion in economic damage, with impacts extending well into parts of Thailand.
Elsewhere, the report noted global temperatures continued to set monthly modern era records in 2025, with global surface land and ocean temperatures during Q1-Q3 2025 slated as the second warmest on record.
As per Gallagher Re, the rising risk of heat-related stress poses a challenge for re/insurers, given that many of its impacts are not currently captured by traditional catastrophe models.
“Risks such as energy grid failures, AI data centre vulnerabilities, soil subsidence, and the broader impacts of extreme heat remain largely ‘unmodeled’ by the major vendors,” the firm’s report said.
It went on, “Given this reality, re/insurers must continue to embrace outside-the-box innovation by either investing in advanced analytics or developing tailored risk assessment frameworks that can help underwriters remove potential blind spots.”
Steve Bowen, Chief Science Officer at Gallagher Re, commented, “2025 has continued to be a ‘top heavy’ year with the Top 5 costliest events (the two major January wildfires in the Los Angeles area and three US SCS outbreaks) accounting for 54% of all global insured losses alone.
“If the last three months of 2025 stay manageable and on par with recent historical loss performance in Q4, this will likely be a further boost to the (re)insurance industry’s financial buffers.”
Bowen also noted that despite the manageable nature of the cat year so far, the industry should continue to expect annual volatility in natural catastrophe losses in the future.
“The trend of greater losses over time will persist, as extreme events become more extreme, or shift their geographical occurrence patterns,” he said.
Bowen concluded, “We should continue to expect that low frequency/probability events may become a bit more likely as the ‘tail’ shifts. The change in hazard behavior / frequency, in combination with other socioeconomic/macroeconomic factors, will ultimately drive greater loss potential.
“You can see that when comparing the most recent historical 5-year (2020-2024) average annual loss (AAL) of $155 billion to the 10-year AAL (2015-2024) of $135 billion. Building financial underwriting protections against loss volatility is critical.”
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