Lockton claims insurance gap worsening due to climate change losses
Climate-related losses are increasingly evident through a combination of physical damage, operational disruption, supply chain dependencies, and gradual environmental change. As a result, a growing proportion of losses either remain uninsured or fall outside the scope of conventional insurance, according to Global heating: navigating a new business reality, a new report from Lockton.
The report looks at the impact of global heating across a range of sectors. In agriculture for example, the largest financial consequences may arise from declining yields or changing growing conditions rather than from physical damage to assets. In August 2026, the European Commission's Joint Research Centre cut its yield forecasts for major EU summer crops by as much as 14 per cent. Multinational organisations with complex supply chains face a parallel challenge, with exposure to hundreds of suppliers across multiple tiers and geographies making it impossible to insure every potential point of failure.
Blake Roseveare, head of specialty at Lockton, said: “Our research shows that global heating is changing the status quo. Organisations are encountering greater underwriting scrutiny with tighter terms and are seeing financial consequences of global heating that do not fit within the usual insurance structures. This is widening the protection gap and increasing demand for alternative approaches to risk transfer that will complement traditional solutions.”
The report suggests that, as climate-related losses increase, so too must the mechanisms used to finance them. Organisations are increasingly adopting a blend of traditional insurance, retained risk, and alternative structures. The report explores the growing role of parametric insurance, captives, catastrophe bonds, and other alternative risk-transfer mechanisms as organisations seek more flexible approaches to financing climate-related risk.
Paul Jones, head of parametric Solutions at Lockton, said: "Parametric insurance is one of the most prominent mechanisms of risk transfer, increasingly being used for managing global heating risk. Structuring cover around weather-related exposures is flexible and multifaceted. Capturing severe events such as drought, the long-term impacts of high temperatures, such as wildfires, and the subsequent risk of excess rainfall and pluvial flooding can be done with effective risk transfer solutions that may otherwise be uninsurable in the traditional risk transfer market.”
According to Lockton insurers are not only pricing risk but also acting as indicators of risk quality. When insurance becomes difficult to obtain, it can serve as an early warning sign that the underlying risks may exceed the measures currently in place to manage them. Insurability itself now stands as a measure of resilience.
“Businesses that can clearly demonstrate investment in resilience, continuity planning, and climate adaptation are often better positioned to secure favourable terms than those relying solely on historical loss experience,” said Roseveare. “This adaptation is already underway. Farmers are changing crop choices, and energy providers are investing in storage and flood resilience. Organisations are recognising that climate-related disruption must be treated as a recurring feature of the operating environment. At Lockton, we’re helping clients navigate this through a combination of traditional insurance and alternative risk transfer, matched to where their exposures sit.”
The report is available here.
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