Insurance companies help policyholders mitigate risks as catastrophe losses rise

Climate disasters such as wildfires and severe storms are becoming more frequent and damaging in the United States, accounting for 83% of the estimated global insurance losses of $107 billion in 2025, according to a new report from the Swiss Re Institute.

This is the sixth year in a row that global insurance losses exceeded $100 billion.

The Los Angeles wildfires last January caused just $40 billion in insured losses, making them the costliest wildfires on record globally, according to Swiss Re.

The insurance research firm said the rising costs are due in part to rising property values ​​as well as homeowners building in areas where wilderness and urban areas mix, which is particularly dangerous.

“Amid annual fluctuations, insurance losses continue to rise. That is why strengthening prevention, protection and preparedness is essential to protect lives and property,” Jerome-Jean Haegele, chief economist at Swiss Re Group, said in a press release.

Insurance companies are increasingly asking policyholders to mitigate their effects. In areas prone to wildfires, this may mean cutting down trees and clearing vegetation to create a defense zone around homes and buildings. In hurricane-prone areas, resilience requires a real focus on construction materials and methods.

FM, a mutual insurance company for commercial and industrial property, has a special research campus in Rhode Island where teams of engineers test and certify materials and systems designed to withstand all types of risks.

“We are an engineering company that does insurance,” Malcolm Roberts, CEO of FM, told CNBC in an interview. “We wouldn’t sell our insurance capability without engineering, and we wouldn’t sell our engineering without insurance.”

FM engineers have developed large-scale tests to simulate things like a Category 2 hurricane, severe hailstorms, wildfires, earthquakes, and even dust explosions.

Facilities Management employs approximately 2,000 engineers who work with each client to identify specific risks and then implement resiliency solutions, such as improving roof and wall materials or installing flood barriers.

“They can’t prevent the hurricane from arriving, but they can prevent the damage when it happens,” Roberts said.

The 190-year-old company’s increasing focus is on hail, which has become an increasingly costly natural disaster. It is also the main cause of damage to solar panels.

FM uses a high-powered “hail gun” to test the flexibility of roofing materials and solar panels to see which products can withstand the impact. Facilities Management issues certificates to verify products that meet the highest standards for property loss prevention.

“We understand the prevailing hail size in that region, test those PV panels for the hail sizes at the right impact, and then design a test standard,” said Lou Grezzo, FM’s chief science officer.

“The bottom line for companies is [if you] Order an FM-certified roof, and you’ll get a roof that you know will withstand the storm in your wind zone.”

Investing in mitigation solutions can be expensive, but financial management provides flexibility credit to help.

“[We] “Give them back 10% of customer premiums to help them implement those solutions…whether it’s climate, fire or equipment risk,” Roberts said.

“I would rather our clients put that capital into risk mitigation than pay me a premium, because in the long run, the trade will work out very well for both of them,” he added.

Likewise, insurance company Hippo advises its insurance clients on mitigation efforts such as automatic or remote shut-offs of gas, water and appliances.

USAA actively reached out to 3 million members in 2025 to train them to protect their property, the insurer said.

“Our members participate in loss mitigation programs with us, whether it’s on flush valves or an electronic device that we can put in your home to detect surges, those types of things…all of that helps at the end of the day,” USAA CEO Juan Andrade told CNBC.