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.