Climate Change

Climate-Driven Transformation: Scaling Resources and Reassessing Risks

Key Findings

96% of Australian insurers are adjusting resource strategies to manage frequent catastrophic (CAT) weather events, compared to 81% of insurers globally.
66% of global insurers see investment in technology as key to improving operational efficiency and managing downtimes between CAT events.
70% of Australian insurers emphasise maintaining a scalable pool of contract adjusters to manage claims influx post-CAT events.
62% of Australian insurers expect clients to invest in health and safety training programs, and 58% foresee adjustments to insurance coverage and risk assessments due to climate change.
A majority of Australian insurers (92%) report a rise in demand for climate-specific insurance products — a 34-percentage point increase from 2024.

Shifting resource strategies amid escalating CAT risks

The alarming surge in CAT events continues to pose significant challenges for Australia’s insurance industry. Climate change has amplified the severity of tropical cyclones, heatwaves, bushfires, floods, and storms, shifting their frequency and intensity in unprecedented ways. In 2023, global insured natural catastrophe losses exceeded AUD 100 billion for the fourth consecutive year, with Australian insurers facing notable impacts from events like the Newcastle hailstorm, flooding in north Queensland, and Christmas storms in eastern Australia.^[¹^]

This challenging environment is driving insurers to reassess their resource strategies. Nearly all Australian insurers surveyed (96%) are adjusting resource management strategies to address the growing demands during these events. By contrast, only 81% of global insurers surveyed report similar adjustments, highlighting a stronger regional focus on proactive measures.

Despite these efforts, only 6% of Australian insurers report significant shifts toward flexible, scalable resource models, compared to 13%

globally. This gap underscores the need for greater exploration of scalable solutions, which allow insurers to efficiently manage unpredictable demand during CAT events while avoiding overextension during quieter periods.

Investing in technology and talent: Key downtime strategies

Globally, 66% of insurers are increasingly leveraging technology to improve operational efficiency, enabling them to manage downtimes between CAT events. These investments are critical for managing the volatility of CAT events and fostering customer trust.

In Australia, 70% of insurers are prioritizing scalable pools of contract adjusters to manage claims surges post-CAT events. By building a reliable network of experienced adjusters, insurers can handle surges in claims while maintaining service quality. This approach also helps mitigate burnout among full-time employees and ensures resilience during periods of high demand.

Heatwaves and climate risks drive strategic shifts

Globally, 47% of insurers have noticed a moderate to significant increase in the frequency of claims related to prolonged exposure to intense heat. In Australia, this figure rises to 66%. This trend correlates with Australia’s rapidly warming climate, where the average temperature has already risen by 1.51 ± 0.23°C since 1910, with the most warming occurring since 1950.^[2]

These extreme heat events have impacted the severity of workers' compensation claims, prompting insurers to reassess risk management priorities. In response:

62% of Australian insurers expect climate trends will lead clients to invest in health and safety training programs.
58% anticipate adjustments to insurance coverage and risk assessments.

Globally, insurers share similar concerns, with adjustments to insurance coverage (57%) and health and safety training investments (45%) identified as key areas of impact.

Pivoting to meet climate-specific demands

The demand for specialised coverage tailored to climate-related risks is rising as environmental risks intensify. Globally, over two-thirds of surveyed insurers report increased requests from policyholders for climate-specific insurance products and coverage, with Australian insurers seeing even higher demand — 92% report increased requests, reflecting a 34-percentage point increase in the trend compared to last year.

This trend is reshaping risk evaluation and underwriting processes, as insurers adapt to the dynamic nature of climate impacts. Providing bespoke coverage to address these risks is becoming a priority. For instance, tailored policies for flood-prone regions or bushfire-affected areas may address specific client needs while mitigating broader risks.

Building resilience in a changing climate

The increasing frequency and severity of climate-driven CAT events have fundamentally reshaped the risk landscape, compelling insurers to rethink traditional approaches to resource management, underwriting, and claims processes. As demand for climate-specific insurance products continues to grow, insurers that proactively adapt their strategies — through investments in scalable resource models, advanced technology, and bespoke coverage solutions — will be better positioned to navigate this evolving landscape.

Looking forward, collaboration across the industry, including with data providers, policymakers, and operational partners, will be critical in addressing these challenges. Combining data-driven insights with strategic planning fosters resilience and sustainability in a rapidly changing environment, ensuring the ability to deliver value to policyholders amidst increasingly unpredictable climate risks.

^{[1] “}^{2024 Climate and Catastrophe Insight}^”,^AON^{. (2024).}

^{[2] “}^{Australia’s Changing Climate}^”,^CSIRO^{. (29 Oct 2024).}