Insuring Against Extreme Heat Navigating Risks in a Warming World 2025

Three ways to transform extreme heat risk management Examples of innovative strategies and solutions Learning to live with extreme heat Build resilience for people, communities and own assets to extreme heat events –Raise awareness and address employee and community health- related risks through education programmes, improved early warning systems, cooling centres and adjusted working patterns –Promote asset-level adaptation such as engineered- and natural- cooling measures, and smart building materials –Leverage parametric solutions to build financial resilience to extreme heat-relate disruptions, including communities in LMICs –Develop heat-resistant crops, medication and food supplies –Assess and amend benefits to cover employees and their families Building system-level protections Implement large scale interventions to protect critical assets and ensure financial resilience to extreme heat and its compound consequences –Build wider contingency into business operations by managing the impact of supplier disruptions due to extreme heat and associated risks –Invest in retrofitting critical infrastructure to withstand greater temperatures –Implement integrated national health management approaches –Enhance resilience by considering adaptation measures to ecosystem services exposed to extreme heat and associated risks Prepare for adaptation limits Consider wholesale changes to entire regions and systems to address breach of temperature thresholds that exceed human and ecosystem health –Leverage state-of-the-art climate risk models to consider transformative adaptation options beyond threshold scenarios, including: –Redesigning cities and buildings –Incentive programs for community relocation –Planning sectoral transitions away from heat or water scarce areas –Promoting social welfare through equitable relocations and transition –Develop flexible strategies that evolve with changing climate conditions and societal needs to prevent or delay reaching adaptation limits The insurance industry can develop innovative and bespoke solutions to address the unique risk landscape posed by extreme heat. Insurers should continue to develop their extreme heat risk data collection strategies, deepen research efforts and strengthen partnerships with key stakeholders to develop innovative solutions products that effectively address the challenges of extreme heat. Partnerships will be critical for bridging the gap between existing insurance frameworks for climate resilience and the unique risk landscape presented by extreme heat. The insurance industry – particularly climate modellers, atmospheric scientists and underwriters – could collaborate on comprehensive data collection to identify the costs of extreme heatwaves and the benefits of resilience interventions. Data sharing and collection would allow both public and private actors to assess their exposure and determine appropriate responses. More broadly, insurance is no longer simply in the business of paying claims – the industry is evolving to play a more active resilience-building role across economies and societies. Insurers should do more to use their risk expertise to promote prevention and preparedness. They can work more closely with society to expand the insurer’s value proposition to include supporting customers’ adaptation, mitigation and resilience measures. When insurers play a more prominent and expanded risk-consulting role, it broadens the insurance value proposition and enhances preparedness, increases resilience, reduces losses and business interruptions, and extends insurability to higher-risk cases and areas. Insurers can design risk-transfer mechanisms that encourage risk- reducing behaviours, similar to past successful examples like lowering car insurance premiums for safe drivers or home insurance premiums for fire-resistant structures. Insurers can also broaden their value through risk education, which is vital to accelerating risk reduction across businesses and communities. Industry leaders must continue to work towards unlocking risk-reducing investments such as heat-resilient infrastructure and NBS, which drive long-term heat mitigation. These measures are typically the most effective with a few key criteria:Marsh McLennan is presenting different pathways to adapt people, systems and economies from extreme heat risk to underpin innovative extreme heat risk management mechanismsTABLE 2 The insurance industry could collaborate on comprehensive data collection to identify the costs of extreme heatwaves and the benefits of resilience interventions. Source: Marsh McLennan. (2024). Turning down the heat. https://www.marshmclennan. com/web-assets/insights/publications/2024/novemvber/extreme-heat-report.pdf. Insuring Against Extreme Heat: Navigating Risks in a Warming World 21