Lower Disaster Losses for Insurers Won’t Add Up to Lower Rates for Homeowners

Insurers lost less money paying disaster claims in 2025, but homeowners hoping that calm weather will lessen their insurance bills are going to be disappointed. 

Insurers chalked up the lowest third-quarter catastrophe losses in nearly two decades. But homeowners remain at the vortex of the world’s insurance pain. Severe weather events, wildfire risk, and regional exposures continue to push premiums higher.

The Gallagher Re Q3 2025 Natural Catastrophe and Climate Report shows global economic losses at $214 billion, way below the 10-year average of $338 billion. Insured losses dropped to $105 billion, the lowest since 2019. July to September was “one of the least expensive Q3s since 2000,” the Gallagher Re analysis said, due to fewer major events.

So globally, insurers got a breather despite this being the sixth straight year that catastrophe losses topped $1 billion.

The benefits, though, didn’t extend to U.S. homeowners.

Why the calm won’t cut homeowner costs

The drop in losses appears to be due mostly to luck and timing, not a major shift in global climate risk.

The third quarter is typically the costliest three-month period of the year for insurers because it’s the season for Atlantic hurricanes and Pacific typhoons. Even with calm weather, the U.S. made up 86% of global insured catastrophe losses year to date, mainly from severe storms and California wildfires.

The Palisades and Eaton wildfires alone caused $40 billion in insured losses.

 So-called “secondary perils” now shape the insurance market, the Gallagher Re report said. Such perils include hail, wildfires, flash flooding, and extreme heat. The more than 30 U.S. storms that have each caused more than $500 million in insured damage this year demonstrate the price of secondary perils.

Scientists noted that while 2025 won’t end as the warmest year on record, it’ll still finish as the second- or third-warmest year. This reinforces that the underlying risk environment hasn’t changed; only this season’s outcomes have.

Thus, premiums aren’t dropping. Even quiet years don’t help when U.S. losses keep hitting the same ZIP codes.

Though the rate of premium increases has slowed, Insurify projected the annual cost of home insurance will increase 8% by the end of the year to a national average of $3,520. This compares favorably to 20% average premium increases over the last two years.

Yet severe weather is still the primary factor behind the increases as insurers seek to recoup losses from previous storm-plagued years.

And the country may not be out of the woods yet with stormy weather. The National Oceanic and Atmospheric Administration (NOAA) confirmed La Niña’s arrival this year, bringing a risk of volatile storms, stronger tornado seasons, and possible late hurricanes. So, 2025’s calm in quarter three may be a rare exception.

“A single $115 billion disaster — above expected annual catastrophe losses — would be enough to meaningfully impact the industry,” the report noted, underscoring that the margin for error is thin.

Severe convective storms alone produced about $61 billion in U.S. economic losses through the third quarter, the report said. Heat-related risks are growing, and wildfire seasons are getting longer.

What’s next? Actions for homeowners to save

While global disaster losses have fallen, insurance rates for homeowners remain largely unchanged. To save money on home insurance premiums, the Insurance Institute for Business and Home Safety and the National Association of Insurance Commissioners recommend that homeowners shop for new policies early, bundle coverages, and raise their deductibles, if doing so is affordable.

Adding flood coverage can also make sense in many areas, including even some away from the coast.

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