Insuring Against Extreme Heat Navigating Risks in a Warming World 2025

Executive summary Extreme heat is one of the most pressing resilience tests for economies and societies. It currently kills approximately 489,000 per year and is projected to cause $2.4 trillion in productivity losses annually by 2030. By 2050, dangerous heat levels will affect at least half the world for at least one month a year. This white paper charts a path for financial institutions, long-term investors and policy-makers to address the causes of extreme heat, develop resilience strategies and fund vital mitigation efforts. Currently, 88% of weather-related disaster funding is spent on reactive post-event responses. This focus must broaden to make full use of insurance industry strengths and target root causes, such as by achieving net-zero transition goals and advancing innovations like vertical urban farming and artificial intelligence (AI)-enabled parametric coverage. Insurers can increase their societal value by encouraging and rewarding policy-holders who mitigate heat risks and reduce their vulnerability. This World Economic Forum report provides a roadmap to address extreme heat impacts through proactive long-term solutions and risk reduction strategies. Less than 60% of global weather-related losses are insured, placing a $150 billion financial burden on governments and communities. Insurers must promote greater resilience to make insurance affordable for all communities. The roadmap for addressing the impacts and causes of extreme heat is a multifaceted framework with specific objectives: 1. Building a common language around extreme heat: The scale of the challenge is daunting but needs to be defined, including by quantifying economies’ and societies’ exposure to rising temperatures. The current risk landscape is assessed in terms of how it has intensified, where impact is most acute and how it will worsen without intervention. It is critical to raise public awareness of what is at risk. 2. Understanding how climate change is changing the insurance industry: The causes and impacts of climate change have led life and non-life insurers to support prevention and risk mitigation. With AI, insurance can significantly improve long-range weather and climate predictions, strengthening prevention and enabling new underwriting approaches. 3. Accelerating adaptation and resilience: Insurers possess unique capabilities to research, assess and reduce extreme heat risk or provide financial mechanisms for global heat adaptation. Their work involves using enormous amounts of loss information accumulated over decades and investing large amounts of capital in high-impact adaptations and resilience interventions. 4. Supporting government policies to cultivate a favourable risk-mitigation environment: Insurance is a highly regulated industry in which companies actively contribute to helping develop, adopt and maintain rules that can be applied to a wide range of socially critical challenges. Climate change is arguably today’s most pressing challenge, and extreme heat is at the centre of many life-threatening perils. 5. Enabling more effective public/private partnerships: The climate-change risks the world faces today cannot be borne by any one company, industry or government agency. All the actions needed to face the threat of intensifying extreme heat will be more effective when successfully coordinated across all the organizations in the insurance industry in close collaboration and partnership with businesses from other sectors, governments and supranational organizations.Addressing extreme heat demands coordinated efforts from insurance, businesses, governments and global organizations. Insuring Against Extreme Heat: Navigating Risks in a Warming World 4