Insuring Against Extreme Heat Navigating Risks in a Warming World 2025

Foreword Prolonged periods of extreme temperatures and increasingly frequent and severe heatwaves have ushered in an age of “global boiling”. In contrast to headline-grabbing hurricanes and earthquakes and their immediately visible catastrophic effects, extreme heat has unleashed a host of perils on populations, communities and infrastructure in a silent, incremental and mostly unnoticed way. The World Economic Forum’s Extreme Heat Resilience Consortium – which brings together the global risk and insurance industry, environmental groups and climate experts – is pleased to present this paper on the wide-ranging effects of extreme heat, which include chronic disease, heightened mortality, reduced economic productivity, drought, wildfire, infrastructure degradation and supply chain fragility. The paper also introduces strategies to enhance society’s preparedness and resilience in the face of this growing climate-related risk. Most importantly, this paper serves as a reminder of our shared responsibility. Building resilience to extreme heat demands the use of all societal levers. The insurance industry can respond to this complex challenge of diffuse and long-tail impacts as a proactive, collaborative partner. We must bring a spirit of community and collaboration and a relevant portfolio of skills and assets to the table. As risk and capital allocation experts, insurers have expertise that can help mitigate the perils presented by extreme heat trends. As investors, we have the tools and motivation to help people and property be less susceptible to their effects. Finally, as global citizens, we have the moral imperative to partner for collective action to protect and strengthen the communities where we live and work. To protect vulnerable communities, insurance coverage must become more accessible and affordable. The insurance industry can do its part by applying decades of accumulated pricing and claims data in new ways, using advanced technologies like artificial intelligence (AI) and machine learning (ML) to discern new patterns and reach never-before-seen levels of predictability and accuracy. Further, to support the populations that need help the most, we will have to innovate traditional underwriting approaches, and parametric insurance – where a claim payment is triggered by an event instead of the prolonged process of documenting damages – will play a crucial role. Further, extreme heat demands a new level of collaboration, with new and different combinations of stakeholders working together. This means insurers working not only with each other but also with regulators, policyholders, local zoning boards, local mayors and community leaders. National adaptation plans are an excellent example of the complementary skills of insurers, public institutions and policy-makers. The basic elements of these plans involve designing available and affordable insurance coverages, tailoring them to be more widely obtainable in heatwave-prone communities and regions, and promoting resilience and risk mitigation efforts that reduce the impact of extreme heat. This paper will be a valuable resource for anyone interested in learning more about the urgency of extreme heat and what can be done to mitigate its effects. I hope it will serve as a call to action for the global insurance community and willing partners everywhere to shape the world’s response.Christopher Townsend Member, Board of Management, Allianz Insuring Against Extreme Heat: Navigating Risks in a Warming World January 2025 Insuring Against Extreme Heat: Navigating Risks in a Warming World 3