Bellrock was recently asked to comment for a major national newspaper on how businesses can manage the cost of insurance policies that are likely to rise due to climate change. The question is timely. It is also too narrow if answered only through the lens of premium negotiation.
Climate change is not simply creating a more expensive insurance market. It is changing the nature of the risk that insurers, reinsurers and capital providers are being asked to underwrite.
Swiss Re Institute reported that global insured losses from natural catastrophes again exceeded US$100 billion in 2025, marking the sixth consecutive year above that level. Munich Re reported a similar position, estimating 2025 natural disaster losses at approximately US$224 billion globally, of which US$108 billion was insured. Munich Re also reported that weather disasters accounted for 92% of total natural catastrophe losses and 97% of insured losses.
Those figures matter because they sit behind the premium increases, higher deductibles, tighter terms and reduced capacity being experienced by businesses in catastrophe-exposed sectors and locations. In Australia, that includes flood, cyclone, bushfire, storm, hail and coastal exposure. It also includes less obvious climate-related risks: construction delay, supply chain disruption, heat stress, energy cost volatility, asset impairment and reduced availability of insurance for certain fossil-fuel-exposed activities.
Bellrock has previously written about this in the context of catastrophe losses and the reinsurance ripple effect. The economic consequence is a compounding feedback loop: rising catastrophe losses increase public and private recovery costs, weaken economic resilience and put further pressure on insurance affordability. That is not just an insurance issue. It is a balance sheet issue.
The answer for business is not simply to “shop the market” harder at renewal.
The most effective way to manage the cost of insurance is to reduce the risk being priced. That starts with risk data. Businesses that can provide insurers with asset-level information, catastrophe modelling, engineering reports, flood and drainage analysis, bushfire mitigation plans, roof-condition reports, business continuity plans and evidence of capital expenditure on resilience are in a stronger position than businesses presenting only last year’s schedule of assets and claims history.
Insurers and reinsurers are increasingly pricing the quality of risk management, not merely the existence of risk transfer.
There is also a growing role for alternative risk transfer. Bellrock has previously written about parametric insurance as a tool that may respond where traditional policies are unavailable, too expensive or too slow. Unlike conventional indemnity insurance, parametric products pay when a defined trigger occurs, such as wind speed, rainfall, temperature, cyclone intensity or another independently measured index. That can provide liquidity quickly following an event, even where proving the precise insured loss under a traditional policy would take longer.
For construction, infrastructure, agriculture, tourism and energy-exposed businesses, parametric solutions may be used to respond to rain delay, heat, wind, lack of snow, low solar irradiance, drought or other weather-dependent events. They will not replace traditional insurance, but they can be used to fill gaps, protect cash flow and manage volatility.
Businesses should also consider whether climate risk is being managed through the broader finance strategy. For some, that may include captives, structured deductibles, catastrophe bonds or self-insured retentions. For others, it may include weather derivatives, energy hedging, power purchase agreements, on-site renewable energy, battery storage or efficiency upgrades to reduce exposure to volatile fossil-fuel and electricity costs.
This is particularly important because climate risk is not only physical. It is also transitional. As economies move toward lower-carbon energy systems, businesses exposed to fossil fuels, carbon-intensive supply chains or energy-intensive operations may face changing insurer appetite, higher capital costs and greater scrutiny from counterparties.
Bellrock’s view is that insurance should be the last line of defence, not the entire climate-risk strategy.
Businesses that wait until renewal to deal with climate risk will be price-takers. Businesses that invest in resilience, understand their exposures, produce better underwriting information and explore alternative financing tools will be better placed to manage premium volatility and secure sustainable insurance capacity.
In simple terms: climate change is forcing insurers and reinsurers to reprice risk. Businesses cannot negotiate that away. They need to reduce the risk being priced.
